##### Table of Contents

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Form 20-F

(Mark One)



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the year ended December 31, 2005

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number 1-10284

Allied Irish Banks,

public limited company

(Exact name
of registrant as specified in its charter)

Ireland

(Jurisdiction of incorporation or organization)

Bankcentre, Ballsbridge, Dublin 4, Ireland

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act



|                                                                           |  |                                          
|-------------------------------------------------------------------------- |  | -----------------------------------------
|Title of each class                                                        |  | Name of each exchange on which
registered
|Ordinary shares of EUR 0.32 each, represented byAmerican Depositary Shares |  | New York Stock Exchange                  

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.



|                                               |  |            
|---------------------------------------------- |  | -----------
|Non-cumulative preference shares of US$25 each |  | 250,000    
|Ordinary shares of EUR 0.32 each               |  | 918,435,570

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No ̈

Indicate by check mark which financial statement item the registrant has elected to
follow.

Item 17 ̈Item 18  x



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

ANNUAL REPORT ON FORM 20-F

FOR THE YEAR ENDED DECEMBER 31, 2005

TABLE OF CONTENTS



|        |  |                                                                              |  |           
|------- |  | ---------------------------------------------------------------------------- |  | ----------
|Item    |  | Item Caption                                                                 |  | PageNumber
|        |  | REPORTING CURRENCY AND EXCHANGE RATES, FORWARD-LOOKING INFORMATION           |  | 1         
|        |  |                                                                             
|        |  | Part I                                                                       |  |           
|1       |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS (Not applicable)       |  |           
|2       |  | OFFER STATISTICS AND EXPECTED TIMETABLE (Not applicable)                     |  |           
|3       |  | KEY INFORMATION                                                              |  |           
|        |  | Selected financial data                                                      |  | 2         
|        |  | Risk factors                                                                 |  | 5         
|4       |  | INFORMATION ON THE COMPANY                                                   |  |           
|        |  | History and development of the company                                       |  | 6         
|        |  | Business overview                                                            |  | 8         
|        |  | Description of property                                                      |  | 20        
|        |  | Organizational structure                                                     |  | 21        
|5       |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 |  |           
|        |  | Critical accounting policies                                                 |  | 22        
|        |  | Operating results                                                            |  | 23        
|        |  | Liquidity and capital resources                                              |  | 38        
|        |  | Trend information                                                            |  | 42        
|6       |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   |  |           
|        |  | Directors and senior management                                              |  | 43        
|        |  | Compensation                                                                 |  | 44        
|        |  | Board practices                                                              |  | 47        
|        |  | Share ownership                                                              |  | 48        
|        |  | Corporate governance                                                         |  | 51        
|        |  | Employees                                                                    |  | 56        
|7       |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            |  |           
|        |  | Major shareholders                                                           |  | 57        
|        |  | Related party transactions                                                   |  | 57        
|8       |  | FINANCIAL INFORMATION                                                        |  |           
|        |  | Consolidated statements and other financial information                      |  | 58        
|        |  | Significant changes                                                          |  | 58        
|9       |  | THE OFFER AND LISTING                                                        |  |           
|        |  | Offer and listing details                                                    |  | 60        
|        |  | Markets                                                                      |  | 60        
|10      |  | ADDITIONAL INFORMATION                                                       |  |           
|        |  | Memorandum and Articles of Association                                       |  | 61        
|        |  | Exchange controls                                                            |  | 61        
|        |  | Taxation                                                                     |  | 61        
|11      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK                          |  |           
|        |  | Risk management                                                              |  | 64        
|        |  | Loan portfolio                                                               |  | 72        
|12      |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES (Not applicable)      |  |           
|        |  |                                                                             
|        |  | Part II                                                                      |  |           
|13      |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  | 85        
|14      |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  | 85        
|15      |  | CONTROLS AND PROCEDURES                                                      |  | 85        
|16A     |  | AUDIT COMMITTEE FINANCIAL EXPERT                                             |  | 85        
|16B     |  | CODE OF ETHICS                                                               |  | 85        
|16C     |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |  | 85        
|        |  |                                                                             
|        |  | Part III                                                                     |  |           
|17      |  | FINANCIAL STATEMENTS                                                         |  | 86        
|18 & 19 |  | FINANCIAL STATEMENTS AND EXHIBITS                                            |  | 86        
|        |  | SIGNATURES                                                                   |  | 188       



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##### Table of Contents

REPORTING CURRENCY AND EXCHANGE RATES

Allied Irish Banks, p.l.c. (AIB or the Company)
and its subsidiaries (collectively AIB Group or Group) publish consolidated financial statements in euro ().The euro was introduced on January 1, 1999. Ireland joined the European Single Currency at the fixed
translation rate of EUR 1=IR£0.787564. Each euro is made up of one hundred cent, denoted by the symbol c in these accounts.

In this Annual Report, references to US dollars, dollars, US$, cents or ¢ are to United States currency, references to EUR, euro,  or
c are to euro currency, references to sterling or Stg£ are to British currency, references to zloty, PLN or zl are to Polish currency and references to Yen are
to Japanese currency. Merely for convenience, this Annual Report contains translation of certain euro amounts into dollars at specified rates. These translations should not be construed as representations that the euro amounts actually represent
such dollar amounts or could be converted into dollars at the rate indicated or at any other rate. Unless otherwise indicated, the translations of euro into dollars have been made at 1.00 to US$ 1.2340, the noon buying rate in the City of New
York for cable transfers in euro as certified for customs purposes by the Federal Reserve Bank of New York (the noon buying rate) on April 21, 2006.

The following table shows, for the periods and dates indicated, certain information regarding the noon buying rate, expressed in US dollars per euro.



|                         |  |              |  |                |  |        |  |       
|------------------------ |  | ------------ |  | -------------- |  | ------ |  | ------
|                         |  | Periodend(1) |  | Averagerate(2) |  | High   |  | Low   
|Year ended Dec. 31, 2001 |  | 0.8822       |  | 0.8919         |  | 0.9535 |  | 0.8370
|Year ended Dec. 31, 2002 |  | 1.0485       |  | 0.9495         |  | 1.0485 |  | 0.8594
|Year ended Dec. 31, 2003 |  | 1.2597       |  | 1.1411         |  | 1.2597 |  | 1.0361
|Year ended Dec. 31, 2004 |  | 1.3538       |  | 1.2487         |  | 1.3625 |  | 1.1801
|Year ended Dec. 31, 2005 |  | 1.1842       |  | 1.2488         |  | 1.3476 |  | 1.1667



|(1) | The noon buying rate at such dates differed from the rates used in the preparation of AIB
Groups consolidated financial statements, which were US$ 0.8813, US$ 1.0487, US$ 1.2630, US$ 1.3621 and US$ 1.1797 to 1.00 at December 31, 2001, 2002, 2003, 2004 and 2005 respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The average rate for each period is the average of the noon buying rates on the last day of
each month during that period.
|--- | --------------------------------------------------------------------------------------------------------------------------

On May 12, 2006 the noon buying rate was EUR1.00 = US$ 1.2888

The accounting policy in respect of the translation of profits and losses arising in foreign locations is set out on page 89.A significant proportion of
the Groups earnings are denominated in currencies other than the euro. As a result, movements in exchange rates can have an impact on earnings growth. In 2005, the US dollar and sterling average accounting rates remained broadly stable
relative to the euro and the Polish zloty strengthened relative to the euro by 12.5% compared with the year to December 2004. Exchange rate movements did not have a material impact on earnings per share growth when the impact of currency hedging
activities is taken into account. The average accounting rates, were as follows: 1 : US$ 1.25 (2004 : US$ 1.25); 1 : Stg£ 0.69 (2004 : Stg£ 0.68); 1 : PLN 4.03 (2004 : PLN 4.53).

Details of the exchange rates used in the preparation of the Consolidated Financial Statements are set out in Note 53 of this report.

FORWARDLOOKING INFORMATION

This document contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of the Group and
certain of the plans and objectives of the Group. In particular, among other statements, certain statements in the Operating and Financial Review and Prospects with regard to management objectives, trends in results of operations, margins, risk
management, competition and the impact of International Financial Reporting Standards are forward-looking in nature. Accordingly, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that
will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes
in economic conditions globally and in the regions in which the Group conducts its business, changes in fiscal and other policies adopted by various governments and regulatory authorities, the effects of competition in the geographic and business
areas in which the Group conducts its operations, the ability to increase market share and control expenses, the effects of changes in taxation or accounting standards and practices, acquisitions, future exchange and interest rates and the success
of the Group in managing these events. Any forward-looking statements made by or on behalf of the Group speak only as of the date they are made.

AIB cautions that the foregoing list of important factors is not exhaustive. Investors and others should carefully consider the foregoing factors and other uncertainties and events when making an investment decision based on any
forward-looking statement. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Report may not occur.



1



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##### Table of Contents

PART 1



|Item 3. | Key Information
|------- | ---------------

Selected financial data

The financial information set forth in the tables below for the years ended December 31, 2005, 2004, 2003, 2002 and 2001 has been derived from the
audited Consolidated Financial Statements of AIB Group for those periods. AIB Groups Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards (IFRS) for the years ended
December 31, 2005 and 2004 (except for the application of IAS 32, IAS 39 and IFRS 4 which apply with effect from January 1, 2005, see First time adoption of International Financial Reporting Standards on page 87) and in accordance with
Irish GAAP for the years ended December 31, 2003, 2002 and 2001, except as described below in respect of the total costs arising from the fraudulent foreign exchange trading activities (Fraudulent Activities) at Allfirst Bank, which
differs in certain significant respects from US GAAP, as outlined in Note 55 of this report. This information should be read in conjunction with, and is qualified by reference to, the accounting policies adopted, the Consolidated Financial
Statements of AIB Group and notes thereon for the years ended December 31, 2005 and 2004 included in this Annual Report.

In
accordance with Irish GAAP, the total costs arising from the Fraudulent Activities at Allfirst Bank, which were identified in February 2002, were reflected by way of an exceptional pre-tax charge of 789 million (after tax 513 million) in
the accounts for the year ended December 31, 2001.

Under US reporting requirements, the losses arising from the Fraudulent Activities
are charged in the years in which they occurred. As a result, the financial statements included in this Annual Report reflect the losses in the years they occurred. Further details in relation to the Fraudulent Activities is provided in Note 58 of
this report.

The costs of 50 million in relation to investigation related charges (see Item 5, Operating Results, paragraph
(d), Investigation related charges), amounted to 26 million in 2004 and 24 million in 2003.



|                                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|----------------------------------------------------------------------------------- |  | -------------------------------------------- | ---- |  | ------------------------------------------- |  | ------- |  | ------ | ------- |  | ------ | ------- |  | ------ | -
|                                                                                    |  | Years ended December 31,                     |     
|                                                                                    |  | 2005                                         |      |  | 2005                                        |  | 2004    |  | 2003   |         |  | 2002   |         |  | 2001   |  
|                                                                                    |  |                                              | IFRS |  | IFRS                                        |  | IR GAAP |  |        | IR GAAP |  |        | IR GAAP | 
|                                                                                    |  | (Dollars inmillions,except pershare amounts) |      |  | (Euro in millions,except per share amounts) | 
|SUMMARY OF CONSOLIDATEDSTATEMENT OF INCOME(1)                                       |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Net interest income                                                                 |  | 3,122                                        |      |  | 2,530                                       |  | 2,072   |  | 1,934  |         |  | 2,351  |         |  | 2,258  |  
|Other finance income                                                                |  |                                             |      |  |                                            |  |        |  | 12     |         |  | 62     |         |  | 67     |  
|Other income                                                                        |  | 1,378                                        |      |  | 1,117                                       |  | 1,168   |  | 1,206  |         |  | 1,514  |         |  | 1,426  |  
|Exceptional foreign exchange dealing losses(2)                                      |  |                                             |      |  |                                            |  |        |  |       |         |  | (18    | )       |  | (417   | )
|                                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Total operating income after exceptional items                                      |  | 4,500                                        |      |  | 3,647                                       |  | 3,240   |  | 3,152  |         |  | 3,909  |         |  | 3,334  |  
|Total operating expenses                                                            |  | 2,482                                        |      |  | 2,011                                       |  | 1,869   |  | 1,960  |         |  | 2,328  |         |  | 2,278  |  
|                                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Operating income before provisions                                                  |  | 2,018                                        |      |  | 1,636                                       |  | 1,371   |  | 1,192  |         |  | 1,581  |         |  | 1,056  |  
|Provisions                                                                          |  | 176                                          |      |  | 143                                         |  | 133     |  | 177    |         |  | 251    |         |  | 204    |  
|                                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Group operating income                                                              |  | 1,842                                        |      |  | 1,493                                       |  | 1,238   |  | 1,015  |         |  | 1,330  |         |  | 852    |  
|Share of results of associated undertakings(1)                                      |  | 184                                          |      |  | 149                                         |  | 132     |  | 81     |         |  | 9      |         |  | 4      |  
|Gain on disposal of property                                                        |  | 17                                           |      |  | 14                                          |  | 9       |  | 32     |         |  | 5      |         |  | 6      |  
|Construction contract income `                                                      |  | 56                                           |      |  | 45                                          |  |        |  |       |         |  |       |         |  |       |  
|Gain/(loss) on disposal of businesses(3)                                            |  | 6                                            |      |  | 5                                           |  | 17      |  | (141   | )       |  |       |         |  | 93     |  
|                                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Income before taxes, minority interests in subsidiaries and preference dividends(4) |  | 2,105                                        |      |  | 1,706                                       |  | 1,396   |  | 987    |         |  | 1,344  |         |  | 955    |  
|Income taxes                                                                        |  | 394                                          |      |  | 319                                         |  | 270     |  | 315    |         |  | 296    |         |  | 187    |  
|                                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Net income - continuing activities                                                  |  | 1,711                                        |      |  | 1,387                                       |  | 1,126   |  | 672    |         |  | 1,048  |         |  | 768    |  
|Discontinued operation, net of tax                                                  |  | 57                                           |      |  | 46                                          |  | 53      |  |       |         |  |       |         |  |       |  
|                                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Net income for the period                                                           |  | 1,768                                        |      |  | 1,433                                       |  | 1,179   |  | 672    |         |  | 1,048  |         |  | 768    |  
|Attributable to:                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Equity holders of the parent                                                        |  | 1,657                                        |      |  | 1,343                                       |  | 1,150   |  | 661    |         |  | 1,024  |         |  | 745    |  
|Minority interests in subsidiaries                                                  |  | 111                                          |      |  | 90                                          |  | 29      |  | 11     |         |  | 24     |         |  | 23     |  
|Preference dividends                                                                |  |                                             |      |  |                                            |  |        |  | (5     | )       |  | (8     | )       |  | (15    | )
|                                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Net income attributable to ordinary stockholders                                    |  | 1,610                                        |      |  | 1,305                                       |  | 1,146   |  | 656    |         |  | 1,016  |         |  | 730    |  
|                                                                                    |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Per ordinary share                                                                  |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Net income  basic                                                                  |  | 186.3                                        | ¢    |  | 151.0c                                      |  | 134.5c  |  | 76.3c  |         |  | 117.0c |         |  | 84.8c  |  
|Net income  diluted                                                                |  | 184.9                                        | ¢    |  | 149.8c                                      |  | 134.0c  |  | 75.9c  |         |  | 115.8c |         |  | 84.2c  |  
|Dividends                                                                           |  | 75.9                                         | ¢    |  | 61.5c                                       |  | 55.9c   |  | 54.00c |         |  | 49.06c |         |  | 43.80c |  
|Amounts in accordance with US GAAP:                                                 |  |                                              |      |  |                                             |  |         |  |        |         |  |        |         |  |        |  
|Net income                                                                          |  | 1,192                                        |      |  | 966                                         |  | 1,176   |  | 1,502  |         |  | 926    |         |  | 630    |  
|Net income applicable to ordinary stockholders                                      |  | 1,145                                        |      |  | 928                                         |  | 1,169   |  | 1,497  |         |  | 918    |         |  | 615    |  
|Net income per ordinary share                                                       |  | 137.6                                        | ¢    |  | 111.5c                                      |  | 137.2c  |  | 174.2c |         |  | 105.5c |         |  | 71.5c  |  
|Net income per ADS                                                                  |  | 275.2                                        | ¢    |  | 223c                                        |  | 274c    |  | 348c   |         |  | 211c   |         |  | 143c   |  



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##### Table of Contents

|                                          |  |                          |      |                                         |      |         |         |        |         |        |         |       
|----------------------------------------- |  | ------------------------ | ---- | --------------------------------------- | ---- | ------- | ------- | ------ | ------- | ------ | ------- | ------
|                                          |  | Years ended December 31,
|                                          |  | 2005                     |      | 2005                                    |      | 2004    |         | 2003   |         | 2002   |         | 2001  
|                                          |  |                          | IFRS |                                         | IFRS |         | IR GAAP |        | IR GAAP |        | IR GAAP
|                                          |  | (Dollars inmillions)     |      | (Euro in millions except share amounts)
|Summary of consolidated balance sheet     |  |                         
|Total assets                              |  | 164,386                  |      | 133,214                                 |      | 101,109 |         | 80,960 |         | 85,821 |         | 89,061
|Loans etc                                 |  | 113,973                  |      | 92,361                                  |      | 67,278  |         | 53,326 |         | 58,483 |         | 57,445
|Deposits etc                              |  | 135,148                  |      | 109,520                                 |      | 82,384  |         | 66,195 |         | 72,190 |         | 72,813
|Dated capital notes                       |  | 3,305                    |      | 2,678                                   |      | 1,923   |         | 1,276  |         | 1,287  |         | 1,594 
|Undated capital notes                     |  | 1,071                    |      | 868                                     |      | 346     |         | 357    |         | 389    |         | 426   
|Other capital instruments                 |  | 259                      |      | 210                                     |      | 497     |         | 497    |         | 496    |         | 496   
|Minority interests in subsidiaries        |  | 1,540                    |      | 1,248                                   |      | 1,211   |         | 158    |         | 274    |         | 312   
|Stockholders funds: non-equity interests |  | 613                      |      | 497                                     |      | 182     |         | 196    |         | 235    |         | 279   
|Stockholders funds: equity interests     |  | 8,233                    |      | 6,672                                   |      | 5,745   |         | 4,921  |         | 4,180  |         | 4,574 
|                                          |  |                          |      |                                         |      |         |         |        |         |        |         |       
|Total capital resources                   |  | 15,021                   |      | 12,173                                  |      | 9,904   |         | 7,405  |         | 6,861  |         | 7,681 
|                                          |  |                          |      |                                         |      |         |         |        |         |        |         |       
|Capital stock - ordinary shares           |  |                          |      |                                         |      |         |         |        |         |        |         |       
|Number of shares outstanding              |  | 918.4                    |      | 918.4                                   |      | 918.4   |         | 907.6  |         | 897.4  |         | 886.7 
|Nominal value of 0.32 per share          |  | 363                      |      | 294                                     |      | 294     |         | 290    |         | 287    |         | 284   
|Capital stock - preference shares         |  |                          |      |                                         |      |         |         |        |         |        |         |       
|Number of shares outstanding              |  | 0.25                     |      | 0.25                                    |      | 0.25    |         | 0.25   |         | 0.25   |         | 0.25  
|Subordinated capital/preference shares(4) |  | 259                      |      | 210                                     |      | 182     |         | 196    |         | 235    |         | 279   
|Amounts in accordance with US GAAP:       |  |                          |      |                                         |      |         |         |        |         |        |         |       
|Ordinary stockholders equity             |  | 9,372                    |      | 7,595                                   |      | 6,797   |         | 5,951  |         | 5,911  |         | 5,664 
|Total assets(1)                           |  | 165,627                  |      | 134,220                                 |      | 100,253 |         | 79,565 |         | 86,432 |         | 88,560



|                                                                                  |  |                          |  |       |  |         |  |         |  |        
|--------------------------------------------------------------------------------- |  | ------------------------ |  | ----- |  | ------- |  | ------- |  | -------
|                                                                                  |  | Years ended December 31,
|                                                                                  |  | 2005                     |  | 2004  |  | 2003    |  | 2002    |  | 2001   
|                                                                                  |  | IFRS                     |  | IFRS  |  | IR GAAP |  | IR GAAP |  | IR GAAP
|                                                                                  |  | %                        |  | %     |  | %       |  | %       |  | %      
|OTHER FINANCIAL DATA(5)                                                           |  |                          |  |       |  |         |  |         |  |        
|Return on average total assets                                                    |  | 1.20                     |  | 1.21  |  | 0.87    |  | 1.21    |  | 0.92   
|Return on average stockholders equity                                            |  | 20.6                     |  | 21.0  |  | 14.1    |  | 23.3    |  | 16.1   
|Dividend payout ratio                                                             |  | 43.5                     |  | 44.7  |  | 69.0    |  | 42.3    |  | 52.0   
|Average ordinary stockholders equity as a percentage of average total assets     |  | 5.3                      |  | 5.7   |  | 6.0     |  | 5.1     |  | 5.4    
|Allowance for loan losses as a percentage of total loans to customers at year-end |  | 0.8                      |  | 1.2   |  | 1.3     |  | 1.6     |  | 1.9    
|Net interest margin(6)                                                            |  | 2.38                     |  | 2.45  |  | 2.72    |  | 3.00    |  | 2.99   
|Tier 1 capital ratios(7)                                                          |  | 7.2                      |  | 8.2   |  | 7.1     |  | 6.9     |  | 6.5    
|Total capital ratio(7)                                                            |  | 10.7                     |  | 10.9  |  | 10.3    |  | 10.1    |  | 10.1   
|Other financial data in accordance withUS GAAP:                                   |  |                          |  |       |  |         |  |         |  |        
|Return on average total assets                                                    |  | 0.81                     |  | 1.32  |  | 1.97    |  | 1.10    |  | 0.79   
|Return on average ordinary stockholders equity                                   |  | 13.21                    |  | 19.57 |  | 24.79   |  | 15.88   |  | 10.82  
|Dividend payout ratio                                                             |  | 58.74                    |  | 43.7  |  | 30.2    |  | 46.6    |  | 61.7   
|Average ordinary stockholders equity as a percentage of average total assets     |  | 6.11                     |  | 6.57  |  | 7.86    |  | 6.69    |  | 6.84   

---

|(1) | On April 1, 2003, AIB completed its integration of Allfirst Financial Inc. into M&T
Bank Corporation (M&T). Consequently, the financial statements for the year ended December 31, 2003 reflect the income and expenses of Allfirst for the period to March 31, 2003. From April 1, 2003, the Group accounted
for its investment in the enlarged M&T as an associated undertaking. The Groups 22.5% share of the income before restructuring costs and taxes of the enlarged M&T is reflected in the Group consolidated statement of income within the
caption Share of operating income of associated undertakings. The Groups share of the taxation charge for the enlarged M&T is included within Share of operating income of associated undertakings in 2005 and 2004 under IFRS and
in the Groups taxation charge under Irish GAAP.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | These amounts represent the losses arising from the Fraudulent Activities, reflected in the
years they occurred under US reporting requirements (see note 58).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The profit on disposal of businesses in 2005 of 5 million relates to
the sale of Community Counselling Services of 4 million (tax charge 1 million) and the deferred consideration of 1 million (tax charge 0.3 million), arising from the sale of the Govett business in 2003. The profit on disposal
of businesses in 2004 of 17 million relates to the sale of BZWBKs subsidiary, Cardpoint S.A. of 13 million (tax charge 2 million) and the deferred consideration of 4 million
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | (tax charge 1 million), arising from the sale of the Govett business in 2003. In 2003, the loss of 141 million on disposal of businesses relates
to the loss on disposal of the Govett business of 153 million (tax credit 1 million) partially offset by the profit on disposal of the AIB New York retail business of 7 million (tax charge 3 million), the profit on disposal
of Polsoft of 4 million (tax charge 1 million) and 1 million being profit on the disposal of Allfirst Financial Inc. recognized in the statement of income (see note 15 to the consolidated financial statements). In August 2001,
AIBs interests in Keppel Capital Holdings Ltd. were sold to Oversea-Chinese Banking Corporation Limited, giving rise to a profit before taxation on disposal of 93 million (tax charge nil).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | 250,000 non-cumulative preference shares of US$25 each were reclassified as
subordinated liabilities and other capital instruments on transition to IFRS. Accordingly, from January 1, 2005, preference dividends are included within net interest income.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | The calculation of the average balances include daily and monthly averages and are considered
to be representative of the operations of the Group.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Net interest margin represents net interest income as a percentage of average interest
earning assets. The net interest margin for the year ended December 31, 2004 reflects a net interest income figure that was adjusted to reflect a 365 day year for comparative purposes.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | The Board of Governors of the Federal Reserve System (the Federal Reserve Board)
guidelines for risk-based capital requirements, applicable to all bank holding companies, require the minimum ratios of Tier 1 capital and Total capital to risk adjusted assets to be 4% and 8% respectively. The Irish Financial Services Regulatory
Authority (IFSRA) also has issued its guidelines for implementation of the requirements of the EC Council Directives on own funds, solvency ratios and capital adequacy in Ireland which, while similar to the Federal Reserve guidelines,
require minimum Tier 1 and Total capital ratios of 4.25% and 8.5% for banking groups, respectively. Furthermore, the Federal Reserve Board has adopted leverage capital guidelines requiring bank holding companies to maintain a minimum ratio of Tier 1
capital to total quarterly average assets (Tier 1 leverage ratio) of at least 3%, in the case of a bank holding company which has the highest regulatory examination rating and is not contemplating significant growth. All other bank
holding companies are expected to maintain a Tier 1 leverage ratio at least 1% to 2% above the stated minimum.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Risk factors

The Groups activities are subject to risk factors that could impact its future performance.
Certain of these risks can be mitigated by the use of safeguards and appropriate systems and actions. Some risks, however, are outside the Groups control and cannot be mitigated. In addition to the matters set out under Forward-Looking
Information, on page 1 of this report, the principal factors that may effect the Groups performance are set out below:

Risk management

Like other banks, the Group faces financial risk in the conduct of its business, such as credit risk, operational risk and market
risk (including liquidity risk). Following the discovery of the Fraudulent Activities in 2002, the Group undertook a number of actions to strengthen the risk management and control processes within the Group. Nonetheless, it is not possible to
eliminate financial risk entirely. Following the Financial Regulator reports on the pricing of foreign exchange products in 2004, a management action plan was put in place to, interalia, improve and simplify product delivery processes in the
Republic of Ireland, and further strengthen enterprise-wide quality assurance, risk and compliance functions. The Groups approach to financial risk management is discussed in Item 11,Quantitative and Qualitative Disclosures about
Risk.

Competition

The
Group faces strong competition across all its markets from local and international financial institutions, including banks, building societies, life insurance companies and mutual insurance organizations. A more detailed discussion of these
competitive factors, including the Groups main competitors, is included in Item 4, Information on the Company  Competition. In 2005, the Irish Competition Authority published a report on competition in the non-investment
banking sector in Ireland, which is currently being evaluated by the Government, the Financial Regulator and other stakeholders. There can be no assurance that any resulting regulatory changes or actions and increased competition will not adversely
affect the Group in one or more of the markets in which it operates.

Regulatory risk

Failure to comply with regulation constitutes a risk in the financial services industry. The Groups business activities are subject to substantial
regulation and regulatory oversight in the geographies in which it operates. In recent years, there have been significant regulatory changes in Ireland, the United Kingdom, the United States and Poland that have resulted in significantly increased
compliance responsibilities and associated costs. See Item 4 Information on the company - Supervision and regulation for further detail. These and future regulatory developments could have an adverse effect on how the Group conducts
its business and on its results of operations. Instances of non-compliance with Irish regulatory obligations have been identified in recent years and management is committed to further embedding a compliance culture throughout the Group. The
Groups business and earnings are also affected by fiscal and other policies that are adopted by the various regulatory authorities of the Irish Government, the European Union, foreign governments and international agencies. The nature and
impact of future changes in such policies are not predictable and are beyond the Groups control.

Uncertain economic conditions

The Groups business activities are dependant on the level of banking, finance and financial services required by its
customers. In particular, levels of borrowing are heavily dependent on customer confidence, market interest rates and other factors that affect the economy. The Group conducts extensive activities in Ireland and elsewhere, most notably in the UK,
the US and Poland. The profitability of the Groups businesses could, therefore, be adversely affected by a worsening of general economic conditions in its markets, as well as by foreign and domestic trading market conditions and/or related
factors, including governmental policies and initiatives. An economic downturn or significantly higher interest rates could increase the risk that a greater number of the Groups customers would default on their loans or other obligations to
the Group, or would refrain from seeking additional borrowing. The Irish and UK economies in particular have seen significant growth in property prices and property-related lending in recent years and, while management believes it has a sensible
approach to property lending and the management of related risks, any significant deterioration in Irish and/or UK property prices, could adversely affect the Groups financial condition and results of operations. For a discussion on the Irish
economy see Item 4 Information on the company - The Irish economy.

Relationship with M&T Bank Corporation (M&T)

The disposal of Allfirst and the concurrent acquisition of a 22.5% shareholding and board representation in M&T in 2002 meant
that the Groups main operations in the US changed from a wholly owned subsidiary to that of an investment in an associated undertaking, with a resulting reduction in control. Management believes that this transaction allows it to continue to
prudently grow its business in the US, benefitting from a more effective day-to-day control over its US operations by the M&T management team, while recognizing that AIB does not exercize a controlling influence on the operations of M&T. In
connection with this transaction the Group has responsibilities to regulators as a source of financial strength and support in respect of the enlarged M&T business.



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##### Table of Contents

|Item 4. | Information on the company
|------- | --------------------------

Allied Irish
Banks, p.l.c. has its registered office at Bankcentre, Ballsbridge, Dublin 4, Ireland. (Telephone number +353-1-660 0311) Additional statistical information may be found elsewhere as follows:



|I. | Average balance sheet - see Item 5 - Average balance sheet and interest rates on pages 26 and 27.
|-- | ---------------------------------------------------------------------------------------------------



|II. | Investment portfolio - see Item 18 - Notes 28 to 30 on pages 129 to 132 and Note 55 on pages 165 to 166.
|--- | --------------------------------------------------------------------------------------------------------



|III. | Loan portfolio
|---- | --------------



| | (a) | Types of loans - See Item 11 - Loan portfolio on page 72.
| | --- | -----------------------------------------------------------



| | (b) | Maturities and sensitivities of loans to changes in interest rates - See Item 18 - Note 57 on pages 176 and 177 and Item 11 - Loan portfolio - Analysis
of loans to customers by maturity and interest rate sensitivity on page 76.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Risk elements
| | --- | -------------



| |  |  | Impaired, past due and restructured loans - see Item 11 - Loan portfolio - Risk elements in lending on page 81.
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Potential problem loans - see Item 11 - Loan portfolio - Provision and allowance for loan losses on pages 76 and 80.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Foreign outstandings - see Item 11 - Loan portfolio - Cross-border outstandings on page 84.
| | - |  | ---------------------------------------------------------------------------------------------



|IV. | Summary of loan loss experience
|--- | -------------------------------



| | (a) | Analysis of the allowance for loan losses - see Item 11 - Loan portfolio - Movements in the allowance for loan losses on page 77.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------



| | (b) | Allocation of the allowance for loan losses - see Item 11 - Loan portfolio - Analysis of allowance for loan losses on page 80.
| | --- | --------------------------------------------------------------------------------------------------------------------------------



|V. | Deposits and short-term borrowings
|-- | ----------------------------------

See Item 5 -
Placings with banks,Deposits by customers,Customer deposits by currency and Short-term borrowings on pages 41 to 42.



|VI. | Capital ratios
|--- | --------------

See Item 5 - Capital
ratios on pages 38 to 39.

History and development of the company

History

AIB, originally named Allied Irish Banks Limited, was incorporated in Ireland in September 1966 as a result of the amalgamation of three long established
banks (the constituent banks) with assets aggregating 324 million. At that time the shares of the Munster and Leinster Bank Limited (established 1885), the Provincial Bank of Ireland Limited (established 1825) and the Royal Bank of
Ireland Limited (established 1836), were acquired by and were transferred to AIB as a holding company. In 1972, AIB became the sole banking entity in place of the three constituent banks, other than with regard to the currency note issue of the
Provincial Bank of Ireland Limited in Northern Ireland, which was transferred to AIB in 1982. This power to issue bank notes in Northern Ireland was transferred to AIB Group (UK) p.l.c. (formerly AIB Group Northern Ireland p.l.c.,) with effect from
January 10, 1994.

In December 1970, AIB commenced the expansion of its network of branches in Britain. Since 1972, AIB has opened
overseas branches in New York, the Cayman Islands and Singapore. Subsidiary companies were set up in the Isle of Man and Jersey (Channel Islands). Representative offices were established in a number of States in the US. In September, 2003, AIB sold
its retail business in New York to Atlantic Bank of New York.

In December 1983, AIB acquired 43% of the outstanding shares of First
Maryland Bancorp (FMB). In 1989, AIB completed the acquisition of 100% of the outstanding shares of common stock of FMB. Over the years there were a number of bolt-on acquisitions, the most notable being Dauphin Deposit Bank
and Trust Company (Dauphin) a Pennsylvania chartered commercial bank which was acquired in 1997. Subsequently, all banking operations were merged into Allfirst Bank.

On April 1, 2003, AIB completed its integration of Allfirst Financial Inc. into M&T Bank Corporation (M&T). Under the terms of
the agreement, AIB received 26.7 million M&T shares, representing a stake of approximately 22.5% in the enlarged M&T, together with US$ 886.1 million cash. The agreement allowed for the cash consideration to be reduced by the
amount of a pre-close dividend from Allfirst Financial Inc. Consequently the cash consideration payable by M&T reduced to US$21.1 million.

In July 1991, AIB acquired TSB Bank Northern Ireland p.l.c. (TSB NI), a bank with 56 branches in Northern Ireland. The AIB and TSB NI businesses in Northern Ireland were integrated and the combined operations trade under the
service mark First Trust Bank. In October 1996, AIBs retail operations in Great Britain were integrated under the direction of a single board and the enlarged entity was renamed as AIB Group (UK) p.l.c. with two distinct trading
names First Trust Bank in Northern Ireland and Allied Irish Bank (GB) in Great Britain.

In February 1995, AIB
acquired its initial minority shareholding of 16.3% of the outstanding shares of Wielkopolski Bank Kredytowy S.A. (WBK) and in June 1996 acquired a further shareholding of 20%. In May 1997, the AIB Group increased its shareholding in WBK
to 60.14%. In September 1999, AIB completed the acquisition of an 80% shareholding in Bank Zachodni S.A. (BZ) from the State Treasury of the Republic of Poland. Subsequent investments during 1999 and 2000 brought AIBs shareholding
to 83%. In June 2001, AIB completed the merger of Wielkopolski Bank Kredytowy S.A. (WBK) and Bank Zachodni S.A. (BZ). The new entity was renamed Bank Zachodni WBK S.A. (BZWBK), in which AIB has a 70.5%
shareholding, together with its subsidiaries and associates.



6



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On November 22, 2005, AIB announced that it had agreed the terms of a joint venture with Aviva Group
p.l.c., for the manufacture and distribution of life and pensions products in the Republic of Ireland. The joint venture brings together Hibernian Life & Pensions Limited and Ark Life. Under the terms of the agreement, AIB will own an
interest of 24.99% in the joint venture company, Hibernian Life Holdings Limited and will enter into an exclusive agreement to distribute the life and pensions products of the joint venture. As part of the transaction, AIB will receive a cash
payment of up to 205.4 million. The transaction was completed at the end of January, 2006.

Recent Developments

Sale and leaseback of Bankcentre

The
Groups headquarters building is situated at Bankcentre, Ballsbridge, Dublin 4.A development project is underway which will double the office space on the campus with an expected completion date of early 2008. During 2005, the Group entered
into a sale and leaseback transaction in relation to this new development. This transaction will generate a capital benefit to the Group which will be derived over a number of years. See also note 12 in the note to the accounts.

On April 26, 2006, the Group announced that it had agreed a sale and leaseback of its existing headquarters building. The property has been sold in
two lots, the total sum paid for the two lots being 377.7 million, with the estimated profit after tax on the deal being approximately 230 million. The initial annual rent payable on these buildings will be 11.6 million per annum.
The capital benefit generated from this transaction will be re-invested in the Groups core banking business to support further profitable growth.

AIB Mortgage Bank

On February 13, 2006 home mortgages to the value of 13.6 billion were transferred from
Allied Irish Banks, p.l.c., to AIB Mortgage Bank, a wholly owned subsidiary and a designated mortgage credit institution for the purposes of the Asset Covered Securities Act 2001.

This subsidiary operates a mortgage covered securities programme with an initial 3.5 billion sold to investors in a split tranche deal with three
and seven year maturities. The maximum aggregate nominal amount of all securities outstanding under the programme will not exceed 15 billion or other currency equivalent at any one time.



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Business overview

Description of business

AIB Group provides a diverse range of banking, financial and related services, principally in Ireland, the United States (US), the United
Kingdom (UK) and Poland. AIB has some 275 branches and outlets in the Republic of Ireland, where the directors estimate its share of the total market for both euro loans and deposits to be in excess of 20%. In Northern Ireland, through
its wholly-owned subsidiary AIB Group (UK) p.l.c., which trades there as First Trust Bank, AIB Group operates from some 57 branches and outlets. In Britain, AIB Group (UK) p.l.c., which trades there as Allied Irish Bank (GB), provides a range of
banking services through 33 branches and 10 development offices.

Until April 1, 2003, AIBs main operations in the US were
carried out through its subsidiary Allfirst Financial Inc. (Allfirst) and through the corporate and retail services of its New York branch. Allfirst operated through branch offices in Maryland, adjoining states and the District of
Columbia. Since April 1, 2003, AIBs main operations in the US are carried out through its interest in M&T Bank Corporation (M&T). M&T is headquartered in Buffalo, New York and has a branch network of approximately
700 branches in six states and the District of Columbia. AIBs direct presence in the US consists of corporate banking, treasury and not-for-profit businesses based in New York, with offices in a number of other principal US cities.

In Poland, the Group operates from 383 branches and outlets, primarily in Western Poland, through its 70.5% owned subsidiary BZWBK.

AIB Groups activities are conducted through four major operating divisions - AIB Bank ROI;AIB Bank GB & NI; Capital Markets; and Poland.
At December 31, 2005 AIB Group had consolidated total assets of 133.2 billion and employed over 23,200 people on an average full time equivalent basis.

The distribution of assets and the number of employees between those major operating divisions was as follows:



|                 |  |                               |  |                                       |  |        |  |    
|---------------- |  | ----------------------------- |  | ------------------------------------- |  | ------ |  | ---
|                 |  | AssetsAs at December 31, 2005 |  | EmployeesYear ended December 31, 2005
|Division         |  | (Euro inmillions)             |  | %                                     |  |        |  | %  
|AIB Bank ROI     |  | 55,224                        |  | 42                                    |  | 9,672  |  | 42 
|AIB Bank GB & NI |  | 20,031                        |  | 15                                    |  | 2,997  |  | 13 
|Capital Markets  |  | 44,371                        |  | 33                                    |  | 2,536  |  | 11 
|Poland           |  | 7,813                         |  | 6                                     |  | 7,312  |  | 31 
|Group            |  | 5,775                         |  | 4                                     |  | 758    |  | 3  
|                 |  |                               |  |                                       |  |        |  |    
|Total            |  | 133,214                       |  | 100                                   |  | 23,275 |  | 100
|                 |  |                               |  |                                       |  |        |  |    

Divisional information

AIB Bank Republic of Ireland division

The AIB Bank ROI division, with total assets of 55.2
billion at December 31, 2005 encompasses the Groups retail and commercial banking operations in Ireland, Channel Islands and Isle of Man; AIB Finance & Leasing; Card Services and AIBs life and pensions subsidiary, Ark Life
Assurance Company Limited. AIB Bank ROI provides banking services through a distribution network of some 275 locations (188 branches and 87 outlets), and in excess of 741 automatic teller machines (ATMs). AIB cardholders also have access
to over 56,000 LINK ATMs in the UK as well as close to 1 million Visa Plus serviced ATMs worldwide. AIB has an agency agreement with An Post, the national post office network, which enables AIB customers to carry out basic transactions at over
1,000 post office locations nationwide. AIB also offers customers a Debit card, which is co-branded Laser and Maestro. This card provides customers with access to Point of Sale domestically via the Laser Scheme (Laser is operated jointly
with other financial institutions in Ireland), ATM access domestically via bi-lateral agreements and internationally at any Point of Sale or ATM that displays the Maestro symbol.

In addition, the division offers phone and internet banking services for personal customers through which they can avail of a range of services
including; view account information, pay bills, transfer money domestically and internationally, open a savings account, apply for a loan, top up a mobile phone and buy and sell shares. For business customers, an internet based banking service
called iBusiness Banking is available. It offers secure internet banking and a comprehensive cash management solution, including domestic and cross-border payment functionality.

Branch banking services are provided across the range of customer segments, including individuals, small and medium sized commercial customers, farmers
and the corporate sector. Through the branch network, the division provides a variety of savings and investment products, loans and overdrafts, home loans, home improvement loans, foreign exchange facilities and issues Visa® and Mastercard® credit cards.

AIB Finance & Leasing is AIBs asset financing arm in Ireland. It markets its services through the AIB branch network and through
intermediaries with whom it has established relationships, such as motor dealers, equipment suppliers, brokers and other professionals, including lawyers, accountants and estate agents. It also lends directly to customers. Its lending services
include vehicle, equipment and fleet leasing, retail and investment property loans, vehicle and equipment hire purchase, insurance premium financing and personal loans.

AIBs life assurance subsidiary, Ark Life Assurance Company Limited, provides a wide range of financial planning services including life assurance, savings and investment instruments, pensions and inheritance tax
planning. AIB recently announced the completion of a joint venture with the Aviva subsidiary Hibernian Life & Pensions Limited and Ark Life whereby the combined entity will provide a full range of products in this sector through a wider
channel offering. In Ireland, general insurance products are sold in the branch network through alliances with partners in the insurance industry.



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##### Table of Contents

AIB Bank Great Britain and Northern Ireland division

The AIB Bank GB & NI division, with total assets of 20.0 billion, operates in two distinct markets, Great Britain and Northern Ireland,
with different economies and operating environments. AIB Group (UK) p.l.c., registered in the UK and regulated by the FSA (Financial Services Authority), operates as the legal entity for the division.

Great BritainIn this market, the Division operates under the trading name Allied Irish Bank (GB) from 33 full service branches and 10 business
development offices. The Divisional Head Office is located in Uxbridge, in West London, with significant back office processing undertaken at the Divisional Processing Centre in Belfast.

A full service is offered to business and personal customers, although there is a clear focus on relationship banking to the mid-corporate business
sector, professionals, and high net worth individuals.

Corporate banking services are offered from London, Glasgow, Birmingham, and
Manchester, with particular expertise in the commercial property, education, health and charity sectors.

In 2004, AIB (GB) won the title
of Britains Best Business Bank from the Forum of Private Business for the sixth consecutive time, being ranked top for customer service and maintaining its lead over other major banks.

Northern IrelandIn this market, the Division operates under the trading name First Trust Bank from 57 full service branches throughout Northern
Ireland. The First Trust Bank Head Office is located in Belfast, together with the Divisional Processing Centre.

A full service is offered
to business and personal customers across the range of customer segments, including personal customers, small and medium sized enterprizes and the corporate sector.

Specialist services, including mortgages, credit cards, invoice discounting and asset finance are based in Belfast and delivered throughout the Division.

First Trust Independent Financial Services provides sales and advice on regulated products and services, including protection, investment and pension
requirements to the whole of the Division.

Capital Markets division

The activities of AIB Capital Markets, with total assets of 44.4 billion at December 31, 2005, comprise corporate banking, treasury (with the exception of the International Banking Services in BZWBK) and
investment banking, which includes the non-Polish asset management and stockbroking activities of the Group.

The activities of the Capital
Markets division are delivered through the following main business units: AIB Corporate Banking, Global Treasury, Investment Banking and Allied Irish America (AIA).

AIB Corporate Banking provides a fully integrated, relationship-based banking service to top-tier companies, both domestic and international financial
institutions and Irish commercial state companies. AIB Corporate Banking has a dedicated unit focusing on developing and arranging acquisition and project finance principally in Ireland, the UK and Continental Europe, and has established Mezzanine
Finance funds and CDO funds. The cumulative size of the CDO funds at December 31, 2005 was 1.6 billion. AIB Corporate Banking operates in Ireland, the UK, the US and Continental Europe.

Global Treasury through its treasury operations manages, on a global basis, the liquidity and funding requirements and the interest and exchange rate
exposure of the Group. In addition, it undertakes proprietary trading activities and provides a wide range of treasury and risk management services to the corporate, commercial and retail customers of the Group. It also provides import and export
services through its international activities.

Investment Banking provides a comprehensive range of services including corporate finance
through AIB Corporate Finance Limited, corporate finance and stockbroking through Goodbody Stockbrokers, structured cross-border financing transactions and sophisticated back-office services through AIB International Financial Services Limited, and
custodial, trustee and fund administration services through a joint venture with The Bank of New York. At December 31, 2005, the AIB /Bank of New York joint venture, AIB /BNY Securities Services Limited had  124 billion of funds
under administration and had assets under custody of 96 billion. Investment Banking services also include the management of alternative asset management activities (i.e. hedge funds), venture capital funds and property fund activities
(principally property in Poland). Asset management is provided through AIB Investment Managers Limited (AIBIM) in the Republic of Ireland. The company manages assets principally for institutional and retail clients with  11.6
billion of funds under management.

AIAs core business activity is within the not-for-profit sector, operating principally from New
York, with offices in a number of other large US cities.

AIB Capital Markets is headquartered at Dublins International Financial
Services Centre. It also operates from a number of other Dublin locations, and operates AIBs treasury operations in London, New York and Poland, corporate banking offices in Dublin, various UK cities, various US cities, Frankfurt and Paris,
and offices managed by AIB International Financial Services Limited in Budapest, Zurich and Luxembourg.



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Poland division

Poland division, with total assets of 7.8 billion at December 31, 2005 comprises Bank Zachodni WBK (BZWBK) in which AIB has a 70.5% shareholding, together with its subsidiaries and associates. BZWBK wholesale treasury
and an element of BZWBK investment banking subsidiaries results are reported in Capital Markets division. AIB completed the merger of its Polish operations in 2001, forming BZWBK which is now Polands fifth largest bank. BZWBKs
registered office is located in Wroclaw in south-western Poland. Key support functions are also located in offices based in Poznan and Warsaw. At the end of 2005, BZWBK had total assets of PLN 29.4 billion (7.6 billion), operated through 383
branches and outlets and 587 ATMs. It employed approximately 7,300 staff, including those employed in the subsidiaries. BZWBK offers comprehensive services to retail and corporate customers. Apart from core banking products and services, its
offering includes mortgages, credit cards, retail bonds, mutual funds, treasury and capital market products, leasing and factoring facilities, foreign trade services, asset management, etc. In providing many of its specialized services, BZWBK is
supported by its subsidiaries. It operates mainly in the western part of the country and also has a significant presence in major urban areas across Poland such as Warsaw, Krakow, Gdansk and Lodz. BZWBK Corporate Business Centers based in Poznan,
Warsaw, Wroclaw, Krakow and Gdansk provide direct and comprehensive relationship-based services to large and mid-sized corporates.

Competition

There is strong competition among providers of banking services, based upon the quality and variety of products and services, the
arrival of new institutions, customer relationship management, convenience of location, technological capability, and the level of interest rates and fees charged to borrowers and interest rates paid to depositors.

AIB Group is committed to pursuing an integrated multi-channel strategy utilizing branches, telephone, internet and other direct channels in a
complementary manner, to provide customers with choice and convenience.

Republic of IrelandAIB Group provides a diverse range of
banking services in the Republic of Ireland. It is subject to competition across the spectrum of banking activities. The major domestic competitor is Bank of Ireland, which like AIB has its headquarters in Dublin. The other principal bank
competitors are Anglo Irish Bank, Bank of Scotland (Ireland), National Irish Bank (which is a subsidiary of Danske Bank), Permanent TSB (the retail division of Irish Life & Permanent p.l.c.,), and Ulster Bank (which is a subsidiary of the
UK bank, Royal Bank of Scotland Group p.l.c.,). There is, in addition, competition from building societies, mortgage specialists, credit unions, post office, and some smaller financial institutions.

In September 2005 the Irish Competition Authority published its report on competition in the (non-investment) banking sector in Ireland. The Competition
Authority report delivers a total of 25 recommendations addressed to the Government, the Financial Regulator, the clearing companies and the banks. These recommendations are currently being evaluated by the relevant stakeholders. Certain
recommendations relating to current account records and information are currently being addressed through their inclusion in the new Consumer Protection Code to be published by the Financial Regulator in July 2006.

AIB Group also encounters competition in the investment and corporate banking areas from both domestic and foreign banks, primarily from Europe and North
America. In the life assurance market, Ark Lifes main competitors are Irish Life and Bank of Ireland Life. The recently completed joint venture between AIB and Aviva positions it within the top three in the market with a combined market share
of approximately 20%.

Britain/Northern IrelandThe trend in the UK banking sector to achieve greater economies of scale and to
outsource activities to lower cost economies continued in 2005, resulting in lower cost income ratios. However, the longer-term impact of this on customers and staff is still uncertain.

The UK Banking sector remains in a highly competitive phase, buoyed by the prevailing low interest rate cycle and recent benign credit experience. In
particular, the demand for finance from the business and corporate sector has been strong, more than offsetting the slowdown in consumer borrowings.

The major competition in Great Britain comes from the main clearers, Royal Bank of Scotland/National Westminster, Barclays, Halifax Bank of Scotland, Lloyds TSB and HSBC. In Northern Ireland, the principal competition
is from Ulster Bank, Northern Bank, Bank of Ireland, and UK building societies. There is also a strong credit union movement targeting the personal market, with the majority of customers using a range of financial product providers to obtain the
most competitive prices. There is also an increasing range of monoline providers moving into the market providing competition in a single product or market sector. The Competition Commission has launched an inquiry into personal current account
banking in Northern Ireland following a referral from the Office of Fair Trading, which is scheduled to finish in 2007.

PolandAIB
Group, through its investment in BZWBK, has an approximate 5% share of the Polish financial services market and important regional market concentration. BZWBK is competing with nationwide banks such as PKO BP, Pekao, Bank BPH, ING Bank Slaski, Bank
Handlowy both in the retail and corporate market. The rivalry among major banks is increasing, yet the Polish banking sector remains relatively young and shows considerable potential for growth. In 2005, the most notable development in the Polish
banking market was the continuing rapid rise in residential mortgage lending, primarily in facilities denominated in foreign currency. BZWBK does not offer foreign currency lending to customers with earnings solely in local currency. Given the
macroeconomic prospects and substantial need for housing development, mortgage lending will remain a key growth area and an area of intensive competition. Good long-term prospects in this and many other areas are likely to attract more foreign banks
and further accelerate competition. Following Polands accession to the EU, credit institutions from other member states can set up branches and undertake banking activities without obtaining a license from the Polish Commission of



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Banking Supervision. In June 2005, a deal was announced between UniCredito Italiano and Bayerische Hypo-Und Vereinsbank which will eventually result in the
merger of Bank Pekao and BPH based on the compromise reached between Unicredito Italiano and the Polish government. On completion, the deal will create the biggest bank in Poland and change the competition profile of the Polish banking sector.

BZWBKs extensive branch network supported by investment in e-banking, increasingly sophisticated product offerings,
customer-friendly procedures and Customer Relationship Management tools should enable it to successfully grow and protect its market share in the target regions. BZWBK operates a centralized IT system which enhances efficiency and development of new
business. This, along with the on-going transfer of knowledge and expertise from AIB Group, makes the Bank well-positioned to compete with major players in the Polish market, both at present and in the future.

United StatesM&T competes in offering commercial and personal financial services with other banking institutions and with firms in a number
of other industries, such as thrift institutions, credit unions, personal loan companies, sales finance companies, leasing companies, securities firms and insurance companies. Furthermore, diversified financial services companies are able to offer a
combination of these services to their customers on a nationwide basis. M&Ts operations are significantly impacted by state and ferderal regulations applicable to the banking industry. Moreover, the provisions of Gramm-Leach, have allowed
for increased competition among diversified financial services providers, and the Interstate Banking Act and the Banking Law may be considered to have eased entry into New York State by out-of-state banking institutions. As a result, the number of
financial services providers and banking institutions with which M&T competes may grow in the future.

Proposals may be introduced in
the United States Congress and in the New York State Legislature and by various bank regulatory authorities which would alter the powers of, and restrictions on, different types of banking organizations and which would restructure part or all of the
existing regulatory framework for banks, bank holding companies and other providers of financial services. Moreover, other bills may be introduced in Congress which would further regulate, deregulate or restructure the financial services industry.
It is not possible to predict whether these or any other proposals will be enacted into law or, even if enacted, the effect which they may have on M&Ts business and earnings.

Strategy

The Groups principal objective is to maintain and enhance its position as
Irelands leading banking group. With that objective in mind, the Board approved a business plan in 2005 that management has been mandated to implement between now and 2010. This business plan is premised on the delivery of consistent earnings
per share growth and shareholder value. Delivery will be based on continued growth in Republic of Ireland retail and corporate business sectors combined with selective pursuit of business opportunities in its UK and Polish markets. In the US and in
certain sectors of the Irish business such as life assurance, the plan is to allow the Group to share in the opportunities for growth that are believed to exist in these markets through shareholdings in M&T and Hibernian, respectively.

The Group is the leading financial institution in Ireland with a strategic focus on market share growth in the business segment and market
share enhancement in the personal segment. Responding to customer expectations, through delivery of competitively priced products combined with excellence in service, will be key enablers. Continued investment in customer relationship management,
process efficiency and risk management competencies will underpin its achievement in a changing competitive environment. In the UK, the Group has both retail (principally in Northern Ireland) and corporate banking businesses, and it has been
recognised for its participation in particular sectors. This selective approach to the development of its UK business will continue. Poland presents different opportunities and requires the management of different challenges. As one of the earliest
entrants to this market, the Group has been an innovator in Poland, with the roll out of a broadly-based commercial banking business that serves the retail and corporate sectors. The Group is focused on embedding sound lending and investment
policies under the supervision of a strong management team, while at the same time empowering management to prudently take advantage of the opportunities for growth that exist. All of these businesses inevitably involve risks, which are discussed
elsewhere in this report, and a key aspect for strategy is the management of these risks in a commercially prudent manner that reflects the realities of these different markets.

In some cases, the Group has elected to participate as a minority shareholder in businesses that, while clearly important, are better exploited by making
use of the management, experience and other resources that exist in the companies in which it is invested. In the US, where the size and complexity of its business and the markets it serves raises challenges, the Group, in addition to developing its
corporate banking activities, exchanged its ownership of Allfirst (based in Maryland, Pennsylvania and Delaware) for a minority interest in M&T (based in upstate New York, but serving a wide range of Eastern states). This transaction, which
included cross Board representation, has allowed the Group to benefit from on-the-ground management of an important asset by a highly experienced and well regarded M&T management team, and the opportunity to continue to participate in this
important and comparatively stable market. Similarly, in deciding how best to develop the Groups life assurance business in Ireland, management concluded it would be best to benefit from economies of scale, distribution channels and management
expertize by entering into its joint venture arrangement with Hibernian.

Through the prudent integration of the strategies developed for
each of these businesses, and a continuing focus on sound capital, lending and risk management considerations, the Group believes it is well positioned to further strengthen its key businesses and to successfully implement the business plan referred
to above.



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The Irish economy

The following section contains some preliminary official economic outturn data, which are correct at the time of signing this report. It also contains some forward-looking statements about the economic outlook which
could be influenced by, among other things, political events and by changes in government economic and fiscal policies and by central bank monetary policies.

AIB Group activities in Ireland account for approximately 69% of total Group assets. As a result, the performance of the Irish economy is extremely important to the Group. However, the Groups business operations
in the United Kingdom, Poland and the United States mean that it is also influenced by political, economic and financial developments in those economies.

Economic growth in the Irish economy, as conventionally measured by changes in real GDP, increased by 4.7% in 2005. This was slightly higher than in 2004, bringing the average increase in the five years to 2005 to
5.1% per annum.

This very strong longer term Irish economic performance reflected a combination of favourable supply and demand side
domestic and international factors which developed in the 1990s. On the domestic side, key factors were a highly educated and growing labour force, now augmented by high levels of immigration, tax reform, and improved wage cost competitiveness
achieved through a series of social partnership arrangements. On the external side, the Irish economy benefited from improved access to European and global markets, capital inflows from the European Union (EU) and inward foreign direct
investment.

All of the expansion in the economy in 2005 came from the growth in domestic demand. The positive contribution from exports
was more than offset by the rise in imports. The latter reflects Irelands strong growth in investment in machinery and equipment. Ireland is currently enjoying a large rise in population of over 2% per annum, an expanding employment base
of around 4.7% per annum and rapid residential and non-residential infrastructural development which fuelled growth in domestic demand of 7.3% in 2005. These factors are expected to have a similar influence on Irish domestic demand in 2006.

Because of the very large role played by exports by foreign owned multinationals in the Irish economy, there is a significant amount of
annual profit repatriations which often results in differences in the annual growth in real GDP and real GNP. The latter was smaller in absolute terms in 2005, by the equivalent of about 15% of nominal GDP. However, real GNP growth in 2005 surpassed
that of real GDP, rising by 5.4%. Over the five years to 2005, real GNP grew at an annual average rate of 4.2%.

The Irish economy is
forecast to grow by 5.3% in terms of changes in real GDP in 2006. The growth in real GNP is also forecast at 5%. Both domestic demand and net exports are forecast to contribute to the growth in real GDP in 2006.

Prospects for the United States and the United Kingdom, Irelands two most important trading partners, are expected to remain reasonably favourable
in 2006. The OECD expects that economic growth in the United States will be about 3.5% in 2006. Growth in the United Kingdom is forecast to be close to its non-inflationary potential of 2.5%. Economic growth in the eurozone was 1.3% in 2005. The
eurozone economy is forecast to grow by around 2% in 2006.

Ireland is a member of the eurozone, where euro notes and coin were introduced
on January 1, 2002. The European Central Bank (ECB), which regulates monetary policy for the euro area as a whole, raised the official refinancing rate by 0.25 percentage points to 2.25% on December 1, 2005, the first change in
rates since June 2003. Rates were increased again in March 2006 by a further 0.25%. As the Irish economy accounts for less than 2% of eurozone GDP, economic and monetary developments in Ireland have only a marginal impact on the determination of
monetary policy in the area as a whole.

In terms of changes in the external value of the euro, there was an improvement in Irish
competitiveness vis-a vis the US dollar in 2005 while the euro remains at competitive levels versus sterling from an Irish point of view. Trade with non-eurozone countries remains important to Ireland. Irish external trade with the United States and
the United Kingdom, our two most important trading partners, accounted for a combined 36% of total merchandise exports and 45% of merchandise imports in 2005.

The annual rate of inflation stood at 3.5% in March 2006. This reflected higher energy costs and the impact of higher mortgage rates. The average rate of inflation in 2005, as measured by the official Consumer Price
Index (CPI), was 2.5%, up from 2.2% in 2004. The average for 2006 is expected to be around 3.3%. Irish inflation is expected to rise broadly in line with the average for the eurozone in terms of the Harmonized Index of Consumer Prices
(HICP).

The Irish public finances are very stable and close to balance. Irish budgetary policy remains well within the terms
of the EUs Stability and Growth Pact, which sets an upper limit of 3% on general government deficits as a percentage of GDP. Ireland had a general government surplus of 1% of GDP in 2005 and is officially projected to run a deficit of 0.6% of
GDP in 2006. The projected deficit comes against a background where public capital borrowing will exceed 4% of GDP and where the Exchequer has a surplus of over 2.5% of GDP in terms of the difference between dayto-day spending and revenue.

Irelands general government debt/GDP ratio is forecast at 28% in 2006. The debt ratio has fallen steadily from 95.5% in 1991. The
maintenance of budgetary stability is helped by the strength of the labour market. Ireland continues to experience a strong rate of net job creation, up 4.6.% year-on-year in the third quarter of 2005. While the growth in the labour force was also
buoyant, the seasonally adjusted unemployment rate stabilized at 4.4% towards the end of 2005.

Irelands medium term prospects remain
favourable, though conditional on the maintenance of overall competitiveness and continued fiscal stability. The government and the social partners are committed to the continuation of these policies. The medium term outlook is pointing to annual
growth in real GDP of 5% on average and the maintenance of an inflation rate of around 2.5% per annum.



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Supervision and regulation

Ireland

Overview of financial services legislation

Since 2003 there has been a single regulatory authority for the financial services sector in Ireland. The Central Bank and Financial Services Authority of
Ireland Act 2003 continued the corporate existence of the Central Bank of Ireland but re-named it the Central Bank and Financial Services Authority of Ireland (the Bank) and established the Irish Financial Services Regulatory Authority
(the Financial Regulator) as a constituent part of the Bank. The Financial Regulator is responsible for regulating and supervising a range of banking and financial services entities in Ireland including credit institutions, investment
firms, stockbroking firms, insurance companies and credit unions and operates on the principle of consolidated regulation. The Central Bank and Financial Services Authority of Ireland Act 2004 (the 2004 Act) establishes the Financial
Services Ombudsman Bureau to deal with certain complaints about financial institutions; consumer and industry consultative panels to advise the Financial Regulator; and imposes new reporting and auditing obligations for financial institutions.

The banking regulatory code in Ireland is comprised principally of the Central Bank Acts 1942 to 1998 (the Central Bank Acts);
regulations made under the European Communities Act 1972; and regulatory notices issued by the Financial Regulator. The ministerial regulations and the regulatory notices of the Financial Regulator implement in Ireland the substantial range of EU
directives relating to banking supervision and regulation, including the Consolidation Directive (2000/12/EC), and the Deposit Guarantee Scheme Directive. To the extent that areas of banking activity in Ireland are the subject of EU regulations or
directives, the provisions of Irish banking law reflect the requirements of those EU instruments.

The Central Bank Acts regulate the
conduct of banking business in Ireland and provide that banking business may only be carried on by the holder of a banking license or an entity which exercises passport rights to carry on business in Ireland (as to which, see further
below). The Financial Regulator may, in its discretion, grant or refuse a license under the Acts and may attach conditions to any licenses granted. The Financial Regulator is empowered in specified circumstances, after consultation with the Minister
for Finance, to revoke a license granted under the Central Bank Acts. Each of Allied Irish Banks, p.l.c. and AIB Finance Limited holds a banking license; no conditions are attached to any of these licenses.

In addition to the credit institutions listed above, the AIB Group includes a number of other financial services companies, each of which is also
regulated by the Financial Regulator, in its capacity as the single financial services regulator. Ark Life Assurance Company Limited, carries on business as an authorized life assurance company and must comply with the provisions of legislation
including, the Insurance Act 1936 and the European Communities (Life Assurance) Framework Regulations 1994 (the Framework Regulations). Goodbody Stockbrokers, is authorized as a stockbroking company pursuant to the Stock Exchange Act
1995, which is the principal piece of legislation regulating stockbroking firms. AIB Mortgage Bank, is a designated mortgage credit institution under the Asset Covered Securities Act 2001, to issue mortgage covered securities. In addition to the
role of the Financial Regulator, the activities of a credit institution that is designated for the purposes of the Asset Covered Securities Act 2001 are subject to close oversight by an independent covered assets monitor. The role of the covered
assets monitor is principally to ensure that the assets maintained in the covered assets pool are sufficient to provide adequate security to the holders of the asset covered securities. A number of subsidiaries of AIB Group including AIB Investment
Managers Limited, AIB Corporate Finance Limited, Allied Irish Capital Management Limited and AIB International Financial Services Limited, provide investment business services and investment advice and each is authorized as an investment business
firm under the Investment Intermediaries Act 1995.

AIB Groups operations in other jurisdictions are addressed below.

The EU passport

The Second Banking
Directive (Directive 89/646/EEC) was the key legislative provision which introduced a single market in banking within the European Union (the EU). The Second Banking Directive was implemented in Ireland by the European Communities
(Licensing and Supervision of Credit Institutions) Regulations 1992 (the Passport Regulations). The Passport Regulations permit a credit institution authorized in an EU Member State (the Home State) to carry on business as
such in any other EU Member State (the Host State) without having to obtain an official authorization from the relevant regulator in the Host State. The authorization from the Home State operates effectively as a passport to
do business throughout the EU. Other EU Directives which have been implemented in Ireland provide similar passporting mechanisms for authorized stockbroking firms, authorized investment business firms and authorized life assurance
companies. In the spirit of co-operation between financial regulators throughout the EU, the Passport Regulations provide that in exercising its regulatory functions, the Financial Regulator may collaborate with any competent authority from another
Member State with similar functions, to the extent that it considers reasonable. The Passport Regulations also permit the Financial Regulator to carry out an inspection or investigation of a credit institution from another EU Member State which has
exercized passport rights and established a branch in Ireland.

The Financial Regulator

The Financial Regulator has a wide range of statutory powers to enable it to effectively regulate and supervise the activities of financial institutions
in Ireland. Features include prudential regulation, codes of conduct and restrictions on acquiring transactions, each of which is addressed in more detail below. The Financial Regulator also has wide-ranging powers of inspection: inspectors
appointed by the Financial Regulator may enter the relevant premises, take documents or copies thereof, require persons employed in the business to provide information, and order the production of documents. In cases of extreme concern, the
Financial Regulator may direct a license-holder to suspend its business activity for a specified period and may also intervene in the management or operation of an entity. The Financial Regulator must also approve appointments to senior and
influential positions in licensed entities, and it is finalising new fitness and probity requirements, to be applied from June 2006.



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The Financial Regulator may impose administrative sanctions directly on financial institutions for
failure to comply with regulatory requirements (including codes of conduct and practice), subject to a right of appeal by the institution to the Irish Financial Services Appeals Tribunal. Such administrative sanctions may include a caution or
reprimand, financial penalties (not exceeding 5 million in the case of a company or 0.5 million in the case of an individual), and a direction disqualifying a person from being concerned in the management of a regulated financial service
provider.

The 2004 Act gives the Financial Regulator the power to request a licensed entity to provide it with a statement confirming that
the entity has complied with legal obligations that the Financial Regulator may identify in the relevant request.

Prudential supervision and codes of
conduct

In the context of its prudential supervision of credit institutions and investment business firms, the Financial Regulator has
powers to implement EU Directives relating to the financial regulation of such entities. It may from time to time require a credit institution/investment business firm to maintain a specified ratio, or a certain minimum or maximum ratio, between its
assets and its liabilities, which may be expressed to apply to all license-holders of a specified category or categories, to the total assets or total liabilities of the license-holders concerned, or to specified assets or to assets of a specified
kind. The Financial Regulator is concerned principally to ensure that certain minimum standards apply (before a license/authorization is issued and, on an ongoing basis) in respect of the following: (a) initial capital requirements;
(b) own funds/solvency requirements; (c) capital adequacy requirements; (d) liquidity requirements; (e) large exposures limits; and (f) funding requirements. The European Communities (Financial Conglomerates) Regulations
2004 (the Financial Conglomerate Regulations) have implemented in Ireland the Financial Conglomerates Directive (Directive 2002/87/EC). The Financial Conglomerate Regulations put in place new rules regarding the supplemental supervision
of regulated entities in a financial conglomerate; that is, a financial group which provides products and services in the banking, investment and insurance sectors. The new requirements include own funds requirements, notification obligations in
relation to risk concentrations and intra-group transactions and obligations in relation to the maintenance of adequate risk-management processes and internal control mechanisms.

The existing capital adequacy rules for credit institutions and investment business firms are derived substantially from the Basel I Accord originally
signed in 1988 and implemented at EU level by the EU Own Funds/Solvency Ratio Directives. It is expected that, following the publication of the Basel II framework, and the implementation of European Commissions Proposal of July 14, 2004
for the Capital Requirements Directive, the capital adequacy rules currently applicable to banks and investment firms will be amended significantly, so as to relate capital levels more closely to risks. AIB Group is currently considering the impact
of the new requirements on its business. In terms of prudential supervision of other financial services firms within AIB Group, a designated mortgage credit institution is subject to detailed rules regarding the maintenance and composition of its
covered assets pool, in order that it may issue asset-covered securities; and a life assurance company is required by the Financial Regulator to ensure that it maintains technical and mathematical reserves, a prescribed margin of solvency and a
minimum guarantee fund.

For prudential reasons, restrictions are imposed generally on acquiring transactions involving an
investment by third parties in a credit institution, investment business firm, stockbroking firm or life assurance company. The approval of the Financial Regulator is required for a substantial acquisition by a credit institution.

A credit institution is also restricted in terms of the investments which it may make in third parties. First, the Licensing and Supervision Requirements
and Standards for Credit Institutions (the Licensing Standards) prohibit a credit institution from acquiring, directly or indirectly, more than 10% of the shares or other interests in another company without the prior written approval of
the Financial Regulator. The credit institution must also notify the Financial Regulator of any disposal of the whole or part of such a holding. Second, the Passport Regulations prohibit a credit institution from investing an amount of more than 15%
of its own funds in the acquisition of a qualifying holding of any company, other than another credit institution or financial institution or an EU-authorized insurance company. The total amount of such qualifying holdings should not exceed 60% of
the credit institutions own funds.

The Financial Regulator has issued a range of codes of conduct, codes of practice and other
requirements such as advertising standards applicable to, variously, credit institutions and other regulated financial entities (including investment business firms, stockbroking firms and insurance companies). The codes address a substantial range
of requirements including; supervisory and reporting requirements; advertising requirements; books and records requirements; disclosure requirements; and client money requirements. The Financial Regulator plans to finalize a new Consumer Protection
Code in July 2006 with the phased implementation over the following 12 months.

The European Communities (Insurance Mediation) Regulations
2005 have implemented the EU Directive on insurance mediation and lay down rules for undertaking insurance mediation and reinsurance mediation, as well as prescribing registration requirements for persons who wish to carry out insurance mediation
business or act as an insurance intermediary or as a reinsurance intermediary.

Every credit institution that is authorised in Ireland is
obliged to draw up and publish its annual accounts in accordance with the European Communities (Credit Institutions: Accounts) Regulations 1992 as amended by the European Communities (International Financial Reporting Standards and Miscellaneous
Amendments) Regulations 2005.

Deposit protection and investor compensation

Under the European Communities (Deposit Guarantee Schemes) Regulations 1995 and the European Communities (Deposit Guarantee Schemes) Regulations 1999,
which implement in Ireland the Deposit Guarantee Schemes Directive, the Financial Regulator operates a deposit protection scheme under which each licensed bank must contribute to the deposit protection account held by the Financial Regulator.
Currently, the level of contribution required is 0.2 per cent of deposits (in whatever currency)



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held at all branches of the licensed bank in the EEA, including deposits on current accounts but excluding interbank deposits and deposits represented by
negotiable certificates of deposit. The Investor Compensation Act 1998 (the 1998 Act) provided for the establishment of the Investor Compensation Company Limited (the ICCL) to administer and supervise investor compensation
schemes. The 1998 Act requires authorised investment firms to pay the ICCL such contribution to the fund maintained by the ICCL as the ICCL may from time to time specify. The ICCL is given discretion to specify different rates or amounts of
contributions or different bases for the calculation of contributions of different classes or categories of investment firms. The maximum amount payable is 90% of all deposits held by one depositor, subject to a maximum compensation payment of
20,000.

Companies legislation

Each Irish AIB Group company is incorporated under the Irish Companies Acts 1963 to 2005 (the Companies Acts) or previous legislation having equivalent effect, and must comply with the provisions of such legislation. The
Director of Corporate Enforcement, an Irish independent statutory officer, is responsible for encouraging compliance with, and enforcement of, the Companies Acts.

Although not-yet-commenced provisions of the Companies (Auditing and Accounting) Act 2003 (the 2003 Companies Act) propose changes to the corporate governance regulatory framework in Ireland for a range of
companies (including all public limited companies, and private limited liability companies exceeding prescribed thresholds), those proposed changes are to be modified significantly before they are brought in to force. In December 2005, the Minister
for Trade and Commerce announced that the 2003 Companies Act will be amended to require directors of affected companies to make a statement of compliance with regard to tax law and many indictable offences in company law, in which the directors:
(a) acknowledge their responsibilities for securing compliance with regard to those obligations; (b) adopt a compliance policy statement; (c) confirm that they have arrangements in place for securing material compliance with those
obligations; and (d) confirm that the arrangements have been reviewed during the year. The last two points are subject to a comply or explain principle.

The Financial Regulators power to require a regulated entity to provide a statement of compliance with the entitys legal obligations has been mentioned above.

Consumers

The provision of credit to consumers is
regulated in Ireland by the Consumer Credit Act 1995 (the 1995 Act) and the 1995 Act is relevant to the AIB Group to the extent that any of its Group companies provides credit to consumers. The 1995 Act prescribes a range of detailed
requirements to be included in consumer credit agreements and imposes a number of obligations on the provider of such credit. The 1995 Act imposes a requirement on all credit institutions to notify the Financial Regulator in advance of imposing any
charge in relation to the provision of a service on a customer; increasing any charge previously notified; or imposing any charge that does not comply with a direction from the Financial Regulator. The European Commission has published a proposal
for a Directive on the Community-wide harmonization of consumer credit law which will impact the provisions of the 1995 Act, but the proposal has yet to be adopted.

Irish law contains a wide range of consumer protection provisions, such as the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 and other measures regulating the content of face-to-face and
distance marketing contracts made with a consumer.

The Consumer Director, a full member of the board of the Financial Regulator, aims to
monitor closely the provision of financial services to consumers, and is finalising its previously-mentioned Consumer Protection Code, which the Financial Regulator plans to finalize in July 2006.

Financial Services Ombudsmans Bureau

The
jurisdiction of the Financial Services Ombudsmans Bureau includes smaller-scale business customers as well as consumers. The Ombudsman, a statutory body, investigates, mediates in and adjudicates on complaints made by such customers. If a
successful conclusion is not mediated and the Ombudsman finds against a financial services provider, the Ombudsman may make an award to a complainant of a maximum of 0.25 million, and may require the financial services provider to modify its
practices relating to the complaint.



Anti-money laundering

Financial institutions (including credit institutions, investment business firms, stockbroking firms and insurance companies) designated under the
Criminal Justice Act 1994 (the 1994 Act) are obliged to take the necessary measures to effectively counteract money laundering in accordance with the provisions of the 1994 Act and the relevant sectoral Guidance Notes which have been
issued with the approval of the Money Laundering Steering Committee. The 1994 Act and the relevant Guidance Notes set out measures to counteract money laundering in line with the Forty Recommendations of the OECD-based Financial Action Task Force
and the EU Directives on the prevention of the use of the financial system for the purposes of money laundering. Analogously, Ireland applies EU and UN mandated restrictions on financial transfers with designated individuals and regimes, and
prescribes criminal offences for participating in the financing of terrorism.

Data protection

The Data Protection Acts 1988 and 2003 (the DPA) regulate the retention and use of data relating to individual customers. The DPA also require
certain data controllers including financial institutions and insurance companies which process personal data to register with the Irish Data Protection Commissioner. Each relevant AIB Group company has complied with its obligations
under the DPA. The European Communities (Electronic Communications Networks and Services) Data Protection and Privacy Regulations 2003 implement the EU Electronic Privacy Directive and regulate cold-calling and other unsolicited communications.



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United Kingdom

Regulation of AIB Group (UK) p.l.c.

AIB Group (UK) p.l.c. is a company incorporated in Northern Ireland and is authorized
by the Financial Services Authority (the FSA) under the Financial Services and Markets Act 2000 (the FSMA) to carry on a wide range of regulated activities (including deposit taking and certain investment business) in the UK.
It carries on business under the trading names Allied Irish Bank (GB) and First Trust Bank in Great Britain and Northern Ireland, respectively.

The FSMA is the principal piece of legislation governing the establishment, supervision and regulation of financial services in the UK. The FSA is the single regulator for the full range of financial business in the
UK; it derives its powers under the FSMA and regulates both the prudential aspects and conduct (including market conduct) of those businesses. The FSA Handbook contains the rules and guidance issued by the FSA.

The FSA is responsible both for the prudential supervision and for the general supervision of AIB Group (UK) p.l.c.s business in the UK. The
FSAs prudential rules include requirements in respect of, among other things, capital adequacy, limits on large exposures and liquidity. The FSA carries out a systematic analysis of the risk profile of each regulated financial institution, in
accordance with its ARROW framework (Advanced Risk Responsive Operating frameWork). The basic method of prudential supervision of banks employed by the FSA involves the regular reporting of statistical information in a set of returns
giving both balance sheet and consolidated statement of income data, returns on the maturity structure of assets and liabilities, sectoral analysis of business and details of concentration of risk in assets and deposits. Regular review meetings are
held by the FSA with AIB Group (UK) p.l.c. management to discuss issues such as performance, risk management and strategy. AIB Group (UK) p.l.c. is also required to comply with the other (non-prudential) rules promulgated by the FSA, including rules
relating to conduct of business, market conduct (including market abuse), money laundering (see further below) and systems and controls.

As with other EU member states, the UK will be required to implement the proposed EU Capital Requirements Directive (described in Supervision and regulation  Ireland above) into national law. The FSA published its second
consultation paper on the implementation of the Capital Requirements Directive in February, 2006. The various approaches under the framework set out in the Capital Requirements Directive will be implemented in the UK in stages, some from
January 1, 2007, and the most advanced from January 1, 2008.

AIB Group (UK) p.l.c. has the statutory power to issue bank notes
as local currency in Northern Ireland (it does this under the name First Trust Bank). In this connection, it is subject to the provisions of the Bank Charter Act 1844, the Bankers (Northern Ireland) Acts 1845 and 1928, the Currency and
Bank Notes Act 1928, the Allied Irish Banks Act (Northern Ireland) 1971, the Allied Irish Banks Act 1981, the Allied Irish Banks Act 1993 and the Allied Irish Banks Act 1996.

The Banking Code is a voluntary code followed by UK banks (and building societies) in their relations with personal customers in the UK. It covers
current accounts, personal loans, savings and credit cards. The first Banking Code took effect in March 1992 and is revised periodically, the most recent revised edition became effective on March 1, 2005. The Business Banking Code covers
banks relations with small businesses (those with a turnover of up to £1 million a year). The first Business Banking Code took effect in March 31, 2002 and a revised edition became effective on March 1, 2005. AIB Group (UK)
p.l.c. has adopted both the Banking Code and the Business Banking Code. Compliance with each of the codes is monitored by the Banking Code Standards Board.

First Trust Independent Financial Advisers Ltd (a company incorporated in Northern Ireland) is authorised by the FSA to advise, arrange and deal (as agent) in certain investments, including pensions, insurance,
securities, shares and regulated mortgage contracts. As in the case of AIB Group (UK) p.l.c., the FSA is responsible both for the prudential supervision and for the general supervision of First Trust Independent Financial Advisers Ltds
business in the UK.

Regulation of AIB

AIB is incorporated and has its head office in Ireland, and is authorized as a credit institution in Ireland by the Financial Regulator. Pursuant to the Banking Consolidation Directive (Directive 2000/12/EC) AIB has exercized its EU
passport rights to provide banking, treasury and corporate treasury services in the UK through the establishment of branches (in the name of AIB) and also by providing services on a cross-border basis.

In accordance with the Banking Consolidation Directive, the home state regulator (here, the Financial Regulator) has primary responsibility
for the prudential supervision of credit institutions incorporated in Ireland. However, credit institutions exercizing their passport rights must comply with certain requirements (in particular, conduct of business rules) set by the
Host State regulator (here, the FSA). In addition, the FSA has a responsibility to co-operate with the Financial Regulator in ensuring that branches of Irish credit institutions in the UK maintain adequate liquidity and take sufficient
steps to cover risks arising from their open positions on financial markets in the UK. The Banking Consolidation Directive will be recast upon the final adoption of the Capital Requirements Directive during 2006, however, the provisions
relating to the EU passport will remain generally untouched.

Under the Banking Consolidation Directive, the Host State regulator (here,
the FSA) is empowered in specified circumstances to impose a prohibition on, or to restrict the listed activities of, an incoming firm utilizing its EU passport. Consistent with the allocation of supervisory responsibilities in the Banking
Consolidation Directive, the FSA would usually only exercize such powers after consulting the Financial Regulator and indeed, in certain circumstances, the Banking Consolidation Directive explicitly requires such consultation. The FSA has a
memorandum of understanding with the Financial Regulator which, inter alia, expresses the willingness of the respective authorities to exchange information in order to facilitate the effectiveness of the supervision of credit institutions in the EU.
It also provides for the exchange of information in crisis situations and in cases where



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the authorities become aware of contraventions of the law by institutions covered by the Banking Consolidation Directive operating in their territory.

Regulation of other AIB Group entities

Certain other AIB Group entities currently have FSA authorization to carry on regulated activities (either by way of the right to provide cross-border services into the UK under the EU passport or by way of direct authorization), however,
they carry on an insignificant amount of business in the UK at present.

Insurance mediation

Regulation of general insurance mediation under the FSMA commenced on January 14, 2005. Arranging, advising on, dealing (as agent) in, and assisting
in the administration or performance of general insurance business (the Insurance Mediation Activities) are (subject to applicable exemptions) regulated activities under the FSMA. Each of AIB Group (UK) p.l.c. and First Trust Independent
Financial Advisers Ltd is authorised by the FSA to carry on all Insurance Mediation Activities.

Mortgage regulation

Regulation of residential mortgage business under the FSMA commenced on October 31, 2004 (the Commencement Date). Entering into,
arranging, advising on and administering regulated mortgage contracts, and agreeing to do any of these things, are (subject to applicable exemptions) regulated activities under the FSMA. AIB Group (UK) p.l.c. is authorized by the FSA to enter into,
arrange and administer (but not advise on) regulated mortgage contracts, while First Trust Independent Financial Advisers Ltd is authorized by the FSA to advise on and arrange (but not enter into or administer) regulated mortgage contracts.

The UK government intends that regulated mortgage contracts will not be regulated by the Consumer Credit Act 1974 (the CCA
1974), which otherwise governs certain credit agreements made with consumers (see below). This exemption only affects credit agreements made on or after the Commencement Date, and credit agreements made before the Commencement Date but
subsequently changed such that a new contract is entered into on or after the Commencement Date and constitutes a regulated mortgage contract. A court order under section 126 of the CCA 1974 is, however, necessary to enforce a land mortgage securing
a regulated mortgage contract that would, apart from this exemption, be regulated by the CCA 1974 or be treated as such.

Dispute resolution

The FSMA gives the FSA the power to make rules relating to the handling of complaints by firms and provides for the establishment of an
independent dispute resolution scheme to resolve complaints about financial services firms quickly and with minimum formality. The body established to administer and operate this scheme is the Financial Ombudsman Service Limited.

Deposit protection and investor compensation

The
Financial Services Compensation Scheme (FSCS) protects depositors in respect of their deposits with authorized banks in the UK. Payments under the FSCS are limited to 100% of the first £2,000 of a depositors total deposits
with the institution and 90% of the next £33,000, resulting in a maximum payment of £31,700. The FSCS also applies to investments, and covers loss arising when an investment business goes out of business and is unable to make payments to
investors and also loss arising from bad investment advice or poor investment management. Payments under the FSCS for a claim against an investment firm (including residential mortgage business) are limited to 100% of the first £30,000 of an
investors total investment and 90% of the next £20,000, resulting in a maximum payment of £48,000.

In respect of insurance mediation
business, payments under the FSCS for a claim against an insurance mediation firm are calculated on the basis of (i) in respect of claims in respect of liabilities subject to compulsory insurance, 100% of the claim and (ii) in respect of
other insurance claims, 100% of the first £2,000 and 90% of the remainder of the claim, with no limit to the claim in either circumstance. Each of AIB Group (UK) p.l.c. and First Trust Independent Financial Advisers Ltd is covered by the FSCS.
AIB, as a bank operating in the UK under its EU passport, is not covered by the FSCS but, in accordance with the Deposit Guarantee Plans Directive (Directive 94/19/EC), is covered by its home state (Ireland) deposit compensation scheme (as described
in Supervision and regulation  Ireland above).

Companies legislation

AIB, having established a place of business in England in connection with its corporate and treasury operations in the UK, is also subject to the
provisions of the Companies Acts of Great Britain which apply to overseas companies. AIB Group (UK) p.l.c. and all other AIB Group companies incorporated in Northern Ireland is subject to the provisions of the Companies Order (Northern Ireland)
1986.

Consumer credit

The CCA 1974
regulates the provision of secured and unsecured loans for amounts up to £25,000 and ancillary credit businesses such as credit brokerage and debt collecting. The Office of Fair Trading is responsible for the issue of licenses under, and the
superintendence of the working and the enforcement of the CCA 1974 and other consumer protection legislation. Both AIB and AIB Group (UK) p.l.c. hold current CCA 1974 licenses. In December 2004, the UK Parliament published a Consumer Credit Bill for
the purposes of reforming the CCA 1974. The Consumer Credit Bill received Royal Assent on March 30, 2006 in the form of the Consumer Credit Act 2006 (the CCA 2006). The amendments brought about by the CCA 2006 to the CCA 1974 will
come into force on such days as the Secretary of State for Trade and Industry may appoint.



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The Unfair Terms in Consumer Contracts Regulations 1999 (together with the Unfair Contract Terms Act
1977, the Unfair Terms Regulations) apply to certain contracts for goods and services entered into with consumers, including mortgages and related products and services. The main effect of the Unfair Terms Regulations is that a
contractual term covered by the Unfair Terms Regulations which is unfair will not be enforceable against a consumer.

Anti-money laundering

All persons engaged in the UK financial sector are subject to the UK anti-money laundering regime as set out in the Money Laundering
Regulations 2003 (the 2003 Regulations) (which impose requirements on such persons as to customer identification, record keeping, internal reporting and training of employees) and the Proceeds of Crime Act 2002 (which requires persons
working in the regulated sector to disclose knowledge or suspicion of money laundering). Regulated entities are also subject to the FSAs Money Laundering Sourcebook (ML) (which reflects rules similar to those in the 2003
Regulations). On January 27, 2006 the FSA published Policy Statement PS 06/1 which stated that, in recognition of the fact that many of the provisions of ML were duplicative of provisions of the existing UK anti-money laundering regime, ML was
to be deleted in its entirety with effect from August 31, 2006. Some of the provisions of ML are being replaced with high level provisions in the FSAs Senior Management Systems and Control sourcebook (SYSC). The majority of
the new provisions came into effect on March 1, 2006. During the transitional period between March 1 and August 31, 2006 compliance with provisions of ML will be treated as compliance of new provisions of SYSC. The Joint Money
Laundering Steering Group (the JMLSG) Guidance Notes 2006 provide practical assistance in complying with the UK anti-money laundering regime.

Data protection

The Data Protection Act 1998 regulates the retention and use of data relating to individual customers. It
requires every data controller who is processing personal data to notify the UK Information Commissioner. Each relevant AIB Group company has made appropriate notifications under that Act.

Poland

Overview of banking regulation

Bank Zachodni WBK S.A. (BZWBK), with its registered office in Wroclaw, is established under Polish Law as a joint stock company authorized to carry out
banking business in Poland. It is subject to the regulatory framework laid down by the Banking Act of 1997 as amended (Banking Act), the National Bank of Poland Act of 1997 as amended (NBP Act), specific regulation by the
National Bank of Poland (NBP) and the Banking Supervision Commission (BSC), the Law on the Banking Guarantee Fund of 1994 as amended (BGF Law). The Banking Act is of primary importance as it regulates the
operation of the Polish banking system. It defines the principles governing the foundation of banks in Poland, their organization, activity, turnaround process, liquidation, bankruptcy and supervision. In compliance with its articles, banking
business in Poland is restricted to holders of banking licenses. After Polands accession to the EU, the amendments to the Banking Act implemented the EU single market principle. As a result, credit institutions from other EU member
states may undertake banking business in Poland upon notifying the BSC.A branch set up by such a credit institution is subject to supervision by appropriate authorities in the credit institutions home state. Still, it must comply with Polish
law and the BSC is obliged to monitor its liquidity. The Banking Act and the respective executive regulations have established various prudential standards, including limits on each banks commitments to individual customers, limits on lending
concentrations, classification of the quality of bank assets, constraints on equity investments, monthly reporting of liquidity levels and capital adequacy ratios. These requirements are generally in line with international standards.

The NBP and the BSC

The NBP Act regulates the NBP, including the
Monetary Policy Council and the BSC. The NBP, being the central bank of Poland, does not engage in commercial banking, but performs regulatory functions in relation to banks operating in Poland. The Monetary Policy Council, which is placed within
the NBP, is responsible for the monetary policy of Poland, sets official interest rates and the obligatory reserve rate. The BSC supervises the activities of Polish banks and its decisions are implemented by the General Inspectorate of Banking
Supervisory (GIBS), an organizationally autonomous authority within the NBP structures. The objective of the supervision carried out by the BSC and its executive agency, GIBS, is to monitor and curtail excessive exposure of banks to
various banking risks and thus ensure the safety of customer deposits and the stability of the financial system. The main tools employed by them include: (a) assessment of adequacy and qualifications of bank management as part of the license
issuing process and the reviewing of the management composition and ownership structure; (b) development of regulations limiting risk exposure, including capital requirements, liquidity levels, limits on net open FX positions, etc.;
(c) monitoring financial standing of banks through the prudential reporting system; (d) identifying potential threats to banks financial soundness and initiating preventive measures and remedy programs; and (e) performing
on-site examinations of banks to evaluate the quality of their reporting, risk management methods and compliance with the applicable law and statutes.

Deposit protection

Pursuant to the BGF Law, a banking guarantee fund was created to provide deposit insurance to all bank customers and to
assist banks in the case of solvency problems. The BGF Law stipulates that banks must contribute the same predetermined percentages of the value of their risk-adjusted assets, guarantees and other off-balance sheet liabilities to the Banking
Guarantee Fund. The scheme provides for full coverage for each depositor up to the PLN equivalent of 1,000 with the surplus being guaranteed at the rate of 90% up to the PLN equivalent of 22,500.



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Supervision of capital markets

As an issuer of securities trading in the regulated market, BZWBK is subject to the three acts governing capital markets in Poland, namely the Act on Trading in Financial Instruments, the Act on Public Offering,
Conditions for Introduction of Financial Instruments to Organized Trading System and on Public Companies, and also the Act on Capital Market Supervision. The new regulations came into effect on 24 October 2005 and superseded the previous Act on
Public Trading in Securities (PTS Act). They have brought complete harmonization of the Polish capital law with the EU regulations, made it more liberal and market-friendly and set up a new legal system (legal issues divided into three
separate groups: primary market, secondary market and supervision) to facilitate implementation of new EU directives. A number of changes were introduced to enhance the level of market protection and provide more effective measures against
irregularities. These include, among others, a precise definition of financial trading manipulation and an obligation of investment firms rendering financial services to notify the Securities and Exchange Commission of Poland (Polish
SEC) of any suspicious transactions.

The status of the Polish SEC as the government agency supervising the Polish capital market
remains unchanged, yet its array of powers is extended to include a couple of new administrative measures. Among many other tasks, the Commission is charged with responsibility to ensure equal access to reliable information for all market
participants. The issuers of securities trading in the regulated market are required to disclose any circumstances or events that classify as inside information. Information is considered inside if it is likely to have a significant impact on the
price or value of the financial instrument or the related derivative instruments, is precise in nature and related to persons executing orders to trade in financial instruments. The issuers are also obliged to make public disclosures in the form of
periodic (annual, semi-annual, quarterly) and current reports (on specific events concerning the issuer) which are regulated by the executive ordinance based on the Act on Public Offering.

Anti-money laundering

The Act of 2000, as amended on Counteracting
Introduction into Financial Circulation of Property Values Derived from Illegal or Undisclosed Sources imposes measures to prevent money laundering and the financing of terrorism. It also defines the scope of entities obliged to register
transactions and their specific duties with regard to gathering and disclosing information. Reports on suspicious transactions are required to be filed with the General Inspector of Financial Information, who analyses them and in cases of justified
suspicion that a given transaction constitutes a crime, passes information to a prosecutor along with respective documents. BZWBK has made the organizational and procedural arrangements that are necessary to comply with the requirements under the
Act.

Data protection

The Act on the Personal Data
Protection of 1997, as amended, determines the principles of personal data processing and the rights of natural persons whose data are or can be processed as a part of a data filing system. The law is enforced by the Bureau of Inspector General who
among other duties maintains a central registry of databases. Registration details include the name and address of the data controller, the scope and purpose of the data processing, methods of collection and disclosure, and the security measures.
BZWBK has submitted relevant notifications to the Inspector General.

United States

Nature of the AIB Groups US activities

AIB
conducts operations in the United States directly and also indirectly through its shareholding in M&T. These direct and indirect activities require AIB and its affiliates to comply with a range of US federal and state laws.

Applicable federal and state banking laws and regulations

The International Banking Act of 1978 (the IBA) imposes limitations on the types of business that may be conducted by AIB in the United States and on the location and expansion of banking operations in the US. Because of its
23.8% shareholding in M&T,AIB is also subject to the provisions of the Bank Holding Company Act of 1956, as amended (together with regulations thereunder, the BHCA), and is subject to regulation by the Board of Governors of the
Federal Reserve System (the Board).

A fundamental principle underlying the Boards supervision and regulation of bank
holding companies is that a bank holding company should act as a source of financial strength to, and commit resources to support, each of its subsidiary banks. Subsidiary banks are in turn to be operated in a manner that protects the overall
soundness of the institution and the safety of deposits. While M&T is the first tier holding company for this purpose, AIB also has responsibility for acting as a source of financial strength and support with respect to M&T and its
subsidiaries.

The business and activities of M&T are subject to regulation by state and federal bank regulatory agencies. Furthermore,
there are regulatory limitations on the amount of dividends the banking subsidiaries of M&T may pay without prior regulatory approval. The banking regulators may prohibit the payment of any dividend which would constitute an unsafe or
unsound practice.

The Gramm-Leach-Bliley Act (the GLBA), signed into law on November 12, 1999, provided for
sweeping financial modernization for commercial banks, savings associations, securities firms, insurance companies, and other financial institutions operating in the United States. Among other things, the GLBA permits qualifying financial
institutions that elect financial holding company (FHC) status to engage in expanded securities and insurance underwriting and sales activities. AIB has not elected FHC status and does not currently intend to engage in expanded
activities pursuant to the GLBA. Similarly, M&T has not elected FHC status.

In addition to its indirect operations in the United
States through M&T,AIB conducts corporate lending, treasury and other operations directly through its New York branch and other offices in major US cities. The New York branch is licensed by the Superintendent of Banks of the State of NewYork,
and is subject to supervision, regulation and periodic examination by the Banking Department of the State of NewYork. Acting through the New York branch and its various US offices, AIB is subject to a variety of federal and state banking and other
laws.



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On October 26, 2001, in response to the events of September 11, the President of the United
States signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the USA Patriot Act). The USA Patriot Act significantly expands the responsibilities of
financial institutions in preventing the use of the US financial system to fund terrorist activities. Title III of the USA Patriot Act (officially, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001) is
the anti-money laundering portion of the USA Patriot Act. Title III provides for a sweeping overhaul of the US anti-money laundering regime. Among other provisions, it requires financial institutions operating in the United States to (i) give
special attention to correspondent and payable-through bank accounts, (ii) implement enhanced reporting, due diligence and know your customer standards for private banking and correspondent banking relationships,
(iii) scrutinize the beneficial ownership and activity of certain non-US and private banking customers and (iv) develop new anti-money laundering programs, due diligence policies and controls to ensure the detection and reporting of money
laundering. The USA Patriot Act requires all US financial institutions to develop anti-money laundering programs. Such required compliance programs are intended to supplement any existing compliance programs for purposes of requirements under the
Bank Secrecy Act and the Office of Foreign Assets Control Regulations.

Applicable federal and state securities laws and regulations

AIBs ordinary shares are listed on the New York Stock Exchange and are registered with the Securities and Exchange Commission (the SEC)
under the Securities Exchange Act of 1934 (the Exchange Act). Like other registrants, AIB files Exchange Act reports and other information with the SEC, including Annual Reports on Form 20-F and Current Reports on Form 6-K. On
July 30, 2002, the President of the United States signed into law the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act). The Sarbanes-Oxley Act imposes significant requirements on AIB and other SEC registrants. These include
requirements with respect to the composition of AIBs audit committee, the supervision of AIBs auditors (and the services that may be provided by such auditors), and the need for personal certification by the chief executive officer and
chief (principal) financial officer of Annual Reports on Form 20-F, as well as the financial statements included in such reports and related matters.

In 2005, the SEC adopted selected rule changes to accommodate specific concerns of non-US SEC registrants such as AIB that are subject to its reporting requirements. On March 2, 2005, it agreed to extend the
deadline for compliance by non-US companies with the internal control requirements adopted under the Sarbanes-Oxley Act. The postponement means that AIB will not become subject to the SECs internal control reporting requirements until the
first fiscal year ending on or after July 15, 2006. In addition, on April 13, 2005, the SEC further amended its rules to provide a one time accommodation to non-US registrants that propose to file financial statements with the SEC prepared
in accordance with IFRS for the first time. This rule change permits eligible non-US registrants, including AIB, to file two years as against the customary three years of income statements, changes in shareholders equity and cash flows
prepared in accordance with IFRS, with appropriate related disclosure. This accommodation has been adopted by AIB in connection with the filing of this Form 20-F. The rule change does not affect the currently applicable requirement to reconcile
selected line items in the financial statements to US GAAP.

Description of property

At December 31, 2005 AIB Group operated from approximately 800 branches and
outlets worldwide, principally in Ireland, Northern Ireland, Britain and Poland. A majority of the branches and offices are owned outright, with the remainder, being held under commercial leases.

AIB Groups headquarters building is situated at Bankcentre, Ballsbridge, Dublin 4, a campus style complex of interlinked buildings on a site of
approximately 14 acres completed in 1979. It contains approximately 350,000 square feet of space (gross) and houses most of AIB Groups support functions (see Item 4 - Recent Developments in respect of the agreed sale and leaseback
transaction relating to this building). A development project is now underway which will double the office space on this campus with an expected completion date of early 2008. The Group currently operates out of a number of head office locations in
Dublin. This new development will facilitate the consolidation of support and business activities and hence significantly reduce the number of head office locations. In 2005, the Group entered into a sale and leaseback transaction in relation to
this development.

In addition, since 2003 AIB Group leases the AIB International Centre in Dublins International Financial Services
Centre containing approximately 120,000 square feet of space (gross). This building, which was previously owned by the Group, is held under a 25 year lease with a break clause in 2013 and is occupied by the Capital Markets division, accommodating
their global treasury management and other activities.

In Britain, AIB Group (UK) p.l.c is the major tenant of Bankcentre - Britain,
located at Belmont Road, Uxbridge, West London, occupying approximately 63% of the 74,000 square feet of office space. The building, held under a 25 year lease from completion of construction in 1988, serves as headquarters for AIB Group operations
in Britain.

In Northern Ireland, AIB Group (UK) p.l.c owns the First Trust Centre, a building containing 90,000 square feet of office
space and located at 92 Ann Street, Belfast. This, together with a building at 4 Queens Square, Belfast comprising 32,000 square feet serves as headquarters for AIB Group operations in Northern Ireland.

In Poland, BZWBK owns its head office buildings in Wroclaw at 9/11 Rynek, occupying 62,348 square feet, and at Strzegomska Str. 8-10, occupying 72,448
square feet. The Bank has also a long leasehold interest in its head office buildings at Plac Andersa 5 in Poznan, occupying 108,594 square feet, and at Marszalkowska Str. 142 in Warsaw, occupying 36,748 square feet.



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Organizational structure

During 2005, the business of AIB Group was conducted through four(1)major operating divisions and its principal subsidiaries as described below:

Divisions



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|AIB BANK ROI DIVISION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | AIB BANK GB & NI DIVISION                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | CAPITAL MARKETS DIVISION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Allied Irish Banks, p.l.c.  General retail and commercial banking through some 275 branches and outlets in the Republic of Ireland.  AIB Finance Ltd.  Asset financing company providing installment/variable and fixed rate loans and deposit products in
Ireland.  AIB Leasing Ltd.  Asset financing company providing leasing products in Ireland.  Ark Life Assurance Company Ltd.(2)  The Companys principal activity is the writing of investment, life assurance and pensions
business in Ireland. These services are delivered primarily through the AIB branch network.  AIB Insurance Services Ltd.  Provision of general insurance
services.Acts as an insurance intermediary.  AIB Bank (CI) Ltd.  Jersey (Channel Islands) based company providing a full range of offshore banking services in the
Isle of Man and Jersey including lending and internet banking facilities and also offering offshore trust and corporate services through associated companies. |  | AIB Group (UK) p.l.c.  33 branches and 10 development offices in Britain, trading as Allied Irish Bank (GB), focused primarily on small and medium sized enterprises.  57 branches and outlets in Northern Ireland, trading as First Trust
Bank, focused on general retail and commercial banking and also asset finance and leasing.  POLAND DIVISION  Bank Zachodni WBK
S.A.  A commercial and retail bank which operates through 383 branches and outlets,
primarily in western Poland. |  | Allied Irish Banks, p.l.c.  Management of liquidity and funding needs; interest and exchange rate exposures; financial market trading activities; provision of lending; trade finance and commercial
treasury services; provision of corporate banking and not for profit activities.  AIB Capital Markets plc  Provision of asset management, fund management
and corporate advisory services, including equity investment and corporate finance.  AIB Corporate Finance Ltd.  Provision of corporate advisory services to
companies including merger, acquisition, capital raising and strategic financial advice.  Goodbody Holdings Ltd.  Provision of a broad range of stockbroking
services, and corporate advisory services, through its subsidiaries, Goodbody Stockbrokers and Goodbody Corporate Finance respectively.  AIB International Financial Services Ltd.  Provider of sophisticated, outsourced financial services and structured financial engineering solutions for international banks and corporations.  AIB Asset Management Holdings (Ireland) Ltd.  Provides asset management and funds services management for institutional and retail clients through
its subsidiary companies AIB Investment Managers Ltd. and AIB Fund Management Ltd.  AIB Fund Services Ltd.  Holds the investment in the joint venture with
Bank of New York to provide fund administration, custodial and trustee services.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 

The above subsidiary undertakings are wholly-owned with the exception Bank Zachodni WBK S.A.
(70.5%). The registered office of each is located in the principal country of operations.



|(1) | AIBs US subsidiary, Allfirst, was integrated into M&T Bank Corporation (M&T) on April 1, 2003. For divisional reporting purposes,
AIBs investment in M&T is recorded under Group.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | On November 22, 2005, AIB announced that it had agreed the terms of a joint venture with Aviva Group p.l.c., for the manufacture and distribution of life and
pensions products in the Republic of Ireland. The joint venture brings together Hibernian Life & Pensions Limited and Ark Life. Under the terms of the agreement, AIB will own an interest of 24.99% in the joint venture company Hibernian Life
Holdings Limited and will enter into an exclusive agreement to distribute the life and pensions products of the joint venture. As part of the transaction, AIB will receive a cash payment of up to 205.4 million. The transaction was completed at
the end of January, 2006.
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|Item 5. | Operating and Financial Review and Prospects
|------- | --------------------------------------------

CRITICAL ACCOUNTING POLICIES

AIBs financial statements are prepared under the historical cost basis, with
the exception of the following assets and liabilities which are stated at their fair value: derivative financial instruments, financial instruments at fair value through profit or loss, certain hedged financial assets and financial liabilities,
financial instruments held for trading and financial assets classified as available for sale. The accounts comply with Irish statute and with International Financial Reporting Standards (IFRS) as well as general practices followed by the
financial services industry in Ireland and the UK, except as described in Note 58 of the Notes to the Consolidated Financial Statements. In the preparation of its financial statements, the Group adopts the accounting policies and estimation
techniques that the Directors believe are most appropriate in the circumstances for the purpose of giving a true and fair view of the Groups state of affairs, income and cashflows. However, different policies, estimation techniques and
assumptions in critical areas could lead to materially different results. Differences between IFRS and US GAAP are set out in Note 55 of the Notes to the Consolidated Financial Statements.

The estimates that have a significant impact on the financial statements and estimates with a significant risk of material adjustment in the next year
are set out below:-

Loan impairment

The estimation of potential loan losses is inherently uncertain and depends upon many factors, including loan loss trends, portfolio grade profiles, local and international economic climates, conditions in various industries to which AIB
Group is exposed and other external factors such as legal and regulatory requirements. For example, should the expectation of loss within a portfolio increase, then this may result in an increase to the required incurred but not reported
(IBNR) loan loss provision level.

A specific provision is made against problem loans when, in the judgement of management, the
estimated repayment realizable from the obligor, including the value of any security available, is likely to fall short of the amount of principal and interest outstanding on the obligors loan or overdraft account. The amount of the specific
provision made in AIB Groups consolidated financial statements is intended to cover the difference between the assets carrying value and the present value of estimated future cash flows discounted at the assets original effective
interest rates. The management process for the identification of loans requiring provision is underpinned by independent tiers of review.

Credit quality and loan loss provisioning are independently monitored by head office personnel on a regular basis. A groupwide system for grading advances according to agreed credit criteria exists with an important objective being the
timely identification of vulnerable loans so that remedial action can be taken at the earliest opportunity. Credit rating is fundamental to the determination of provisioning in AIB Group; it triggers the process which results in the creation of a
specific provision on individual loans where there is doubt on recoverability.

IBNR provisions are also maintained to cover loans, which
are impaired at balance sheet date and, while not specifically identified, are known from experience to be present in any portfolio of loans.

IBNR provisions are maintained at levels that are deemed appropriate by management having considered: credit grading profiles and grading movements, historic loan loss rates, changes in credit management, procedures, processes and policies,
levels of credit management skills, local and international economic climates, portfolio sector profiles/industry conditions.

All AIB
divisions assess and approve their provisions and provision adequacy on a quarterly basis. These provisions are in turn reviewed and approved by the AIB Group Credit Committee on a quarterly basis with ultimate Group levels being approved by the
Group Audit Committee and the AIB Board of Directors.

Fair value of financial instruments

Some of the Groups financial instruments are carried at fair value, including all derivatives, financial assets at fair value through profit or loss and financial
investments available for sale.



Financial instruments are either
priced with reference to a quoted market price for that instrument or by using a valuation model. Where the fair value is calculated using financial-markets pricing models, the methodology is to calculate the expected cash flows under the terms of
each specific contract and then discount these values back to a present value. These models use as their basis independently sourced market parameters including, for example, interest rate yield curves, equities and commodities prices, option
volatilities and currency rates. Most market parameters are either directly observable or are implied from instrument prices. However, where no observable price is available, the instrument fair value will include a provision for the uncertainty in
the market parameter based on sale price or subsequent traded levels. The calculation of fair value for any financial instrument may require adjustment of quoted price or model value to reflect the cost of credit risk (where not embedded in
underlying models or prices used), hedging costs not captured in pricing models and adjustments to reflect the cost of exiting illiquid or other significant positions. This will also include an estimation of the likely occurrence of future events
which could affect the cashflows of the financial instrument. The valuation model used for a particular instrument, the quality and liquidity of market data used for pricing, other fair value adjustments not specifically captured by the model and
market data are all subject to internal review and approval procedures and consistent application between accounting periods.



22



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##### Table of Contents

Retirement benefits

The Group provides a number of defined benefit and defined contribution retirement benefit schemes in various geographic locations, the majority of which are funded. In relation to the defined benefit schemes, a full actuarial valuation is
undertaken every three years and is updated to reflect current conditions in the intervening periods. Scheme assets are valued at market value. Scheme liabilities are measured on an actuarial basis, using the projected unit method and discounted at
the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. Actuarial gains and losses are recognized immediately in the statement of recognized income and expense.

In calculating the scheme liabilities and the charge to the income statement, the directors have chosen a number of assumptions within an acceptable
range, under advice from the Groups actuaries. The impact on the consolidated income statement and the consolidated balance sheet could be materially different if a different set of assumptions were used.

Operating results

The following discussion should be read in conjunction with the consolidated Financial
Statements of AIB Group included elsewhere in this Report. These financial statements were prepared in accordance with IFRS (see First time adoption of International Financial Reporting Standards on page 87). Note 59 sets out the reconciliation from
Irish GAAP to IFRS. IFRS differs in certain significant respects from US GAAP. Reconciliations of certain items in these financial statements to US GAAP are set forth in Note 55 to AIBs Consolidated Financial Statements. The principal
accounting policies adopted by AIB Group are set forth on pages 88 to 100 of AIBs Consolidated Financial Statements.

In this Form
20-F ,AIB provides supplemental information of its results to enable readers to understand the impact of the underlying performance on the key captions in the consolidated statements of income and consolidated balance sheets. In so doing,
significant or one off items have been identified that are considered by management to be non-operating in nature. Such items that have impacted the GAAP reporting on the key captions include:

a) Comparison versus pro-forma 2004 (Non-GAAP)

b) Currency factors

c) Restructuring costs

d) Investigation related charges

e) Ark Life as a discontinued operation

f) Construction
contract income

These factors are described in more detail below.

a) Comparison versus Pro-forma 2004 (Non-GAAP)

The results for 2004 have been restated to take account of International Financial Reporting
Standards (IFRS) implemented with effect from January 1, 2004. This restatement of results for 2004 excludes adjustments for standards implemented with effect from January 1, 2005. IAS 32, IAS 39 and IFRS 4 have been
implemented from January 1, 2005. Had these standards been implemented from January 1, 2004, it would have impacted the accounting for derivatives, loan impairment, income recognition on loans (Effective Interest Rate EIR),
insurance accounting and classification of financial instruments. In addition to the IFRS restated accounts, the following commentary shows the IFRS pro-forma amounts (Non-GAAP) for 2004. The pro-forma figures for 2004 reflect the impacts of EIR,
insurance accounting and classification of non-derivative financial instruments in order to establish a 2004 pro-forma IFRS restatement but do not reflect the impact of accounting for derivatives and loan impairment. A reconciliation of the
statutory IFRS accounts (GAAP) for 2004 to the IFRS pro-forma accounts (Non-GAAP) is shown on page 37. In order to show comparable trends, the growth percentages in the following commentary reflect the IFRS year to December 2005 compared with the
IFRS pro-forma year to December 2004. The growth percentages are also shown on an underlying basis adjusted for the impact of exchange rate movements on the translation of foreign locations profit, excluding hedge ineffectiveness under IFRS.

b) Currency factors

A significant proportion of the
Groups earnings are denominated in currencies other than euro. As a result, movements in exchange rates can have an impact on earnings growth. In 2005, the Polish zloty average accounting rate strengthened relative to the euro by 12.5% and
sterling weakened by 1%. The US dollar average accounting rate was in line with 2004. The positive impact on earnings was offset by hedging losses of 13 million.

At December 31, 2005, approximately 43% of the Groups assets are denominated in currencies other than the euro. Movements in exchange rates can therefore have an impact on balance sheet caption growth
rates. US dollar, sterling and Polish zloty strengthened relative to euro by 15%, 3% and 6% respectively.

c) Restructuring costs

There were restructuring costs of 9 million in 2004 relating to the writedown of property values at Group level.

d) Investigation related charges

Investigation
related charges referred to in the commentary on results relate primarily to the application of prices to foreign exchange products without regulatory approval. AIB provided 50 million for investigation related charges and costs of which
26 million and 24 million were charged in 2004 and 2003 respectively. In 2004 12 million was charged to net interest income and 14 million to operating expenses. In 2003 24 million was charged to other income.



23



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##### Table of Contents

e) Ark Life as a discontinued operation

The income and expenses of Ark Lifes operations disposed of for December 2005 and December 2004 have been reported net of taxation as a discontinued
operation below profit after taxation. The impact of the December 2004 restatement is outlined in Note 2 to AIBs Consolidated Financial Statements .

f) Construction contract income

In 2005, Blogram Limited, a property development company and subsidiary of Allied Irish Banks, p.l.c.,
contracted with the Serpentine Consortium to construct on a fixed price contract basis, a new development at Bankcentre, Ballsbridge, Dublin on their behalf. At December 31, 2005 contract revenue of 81 million less contract expenses of
36 million have been reported as construction contract income. At December 31, 2005, 26 million was due from the consortium in respect of construction contracts in progress.

A subsidiary of AIB has contracted with the Serpentine Consortium to lease the property on completion at an initial rent of 16.1 million per
annum for a period of 33 years with a break clause at year 23.

Net interest income

The following table shows net interest income for the years ended December 31, 2005 and 2004.



|                    |  |                          |  |                   |  |          |  |                                        
|------------------- |  | ------------------------ |  | ----------------- |  | -------- |  | ---------------------------------------
|                    |  | Years ended December 31,
|                    |  | 2005IFRS                 |  | 2004Pro-formaIFRS |  | 2004IFRS |  | Underlying %change 2005 vPro-forma 2004
|                    |  | (Euro in millions)      
|Net interest income |  | 2,530                    |  | 2,178             |  | 2,072    |  | 15                                     
|                    |  |                          |  |                   |  |          |  |                                        

The main factors affecting the level of net interest income earned are the volume of interest earning assets, the
difference between the average rate of interest earned on interest earning assets and the average rate of interest paid on interest bearing liabilities (the interest rate spread), the proportion of interest earning assets financed by interest-free
liabilities and the general level of interest rates. Net interest income, which is the principal element of AIB Groups income, mainly arises from the loan and deposit taking activities of AIB Group.

Commentary on net interest income performance in 2005

Net interest income was 2,530 million in 2005 compared with 2,178 million on a pro-forma IFRS basis in 2004, an increase of 352 million. The increase was impacted by currency factors of 17 million. Excluding this
item net interest income increased by 335 million or 15%. The 15% increase was after incurring 12 million of investigation related charges in 2004.

The key drivers of the increase in net interest income were strong loan and deposit growth in Republic of Ireland and GB & NI, strong loan growth in Corporate Banking and very good growth in loan arrangement
fees. Loans to customers increased by 27% and customer accounts increased by 16% on a constant currency basis since January 1, 2005. Net interest income also benefited from income earned on the 1 billion of perpetual preferred securities
issued in December 2004.

AIB Group manages its business divisionally on a product margin basis with funding and groupwide interest
exposure centralised and managed by Global Treasury. While a domestic and foreign margin is calculated for the purpose of statutory accounts, the analysis of net interest margin trends is best explained by analysing business factors as follows:

The Group net interest margin was 2.38% in 2005, a decrease of 20 basis points compared with 2004 on a pro-forma IFRS basis. The margin
reduction was due to a combination of the following factors:

(a) loans increasing at a faster rate than deposits.

(b) a changing mix of products where stronger volume growth has been achieved in lower margin products; corporate loans and home loans on the lending
side and term deposits and other lower margin products on the deposit side. There was higher growth in mid-market business loans in the Republic of Ireland and the United Kingdom and growth in international corporate operations.

(c) competitive pressures on loan and deposit pricing.

(d) lower yields on the re-investment of deposit and current account funds as they mature, due to the flattening of the yield curve.



The largest factor in the margin reduction was average loans increasing at a
greater rate than average deposits compared with 2004. While this strong lending growth generated good incremental profit, the funding impact resulted in a reduction in the overall net interest margin calculation when net interest income is
expressed as a percentage of average interest earning assets.

The impact of a low rate environment on the investment of deposit funds
particularly affected Republic of Ireland and GB & NI divisions.

While it is difficult to disaggregate trends in product margins
between mix and competitive factors, competitive pricing behaviour did impact loan and deposit margins. The Groups new business lending continued to meet targeted return on capital hurdles. The factors affecting the net interest margin trend
are expected to be continuing features.

Net interest income was 2,530 million in 2005 compared with 2,072 million in 2004 on
an IFRS basis, an increase of 458 million. Of the 458 million increase, 106 million relates to the pro-forma adjustments of IAS 32 and 39. The remaining 352 million increase is commented on and analyzed above in the
commentary on 2005 v pro-forma 2004.



24



---

##### Table of Contents

Average interest rates, gross yields, spreads and margins

The following table shows interest rates prevailing at December 31, 2005 together with average prevailing interest rates, gross yields, spreads and
margins for the years ended December 31, 2005 and 2004.



|                                     |  |             |  |                          |  |       
|------------------------------------ |  | ----------- |  | ------------------------ |  | ------
|                                     |  | At Dec. 31, |  | Years ended December 31,
|                                     |  | 2005        |  | 2005                     |  | 2004  
|                                     |  | %           |  | %                        |  | %     
|Interest rates                       |  |             |  |                          |  |       
|Ireland                              |  |             |  |                          |  |       
|AIB Groups prime lending rate       |  | 3.00        |  | 2.65                     |  | 2.63  
|European inter-bank offered rate     |  |             |  |                          |  |       
|One month euro                       |  | 2.40        |  | 2.14                     |  | 2.08  
|Three month euro                     |  | 2.49        |  | 2.19                     |  | 2.11  
|United Kingdom                       |  |             |  |                          |  |       
|AIB Groups base rate                |  | 4.50        |  | 4.66                     |  | 4.39  
|London inter-bank offered rate       |  |             |  |                          |  |       
|One month sterling                   |  | 4.59        |  | 4.68                     |  | 4.46  
|Three month sterling                 |  | 4.58        |  | 4.71                     |  | 4.59  
|United States                        |  |             |  |                          |  |       
|Prime rate                           |  | 7.25        |  | 6.19                     |  | 4.34  
|Poland                               |  |             |  |                          |  |       
|One month zloty                      |  | 4.52        |  | 5.27                     |  | 5.92  
|Gross yields, spreads and margins(1) |  |             |  |                          |  |       
|Gross yield(2)                       |  |             |  |                          |  |       
|Group                                |  |             |  | 4.79                     |  | 4.62  
|Domestic                             |  |             |  | 4.18                     |  | 4.06  
|Foreign                              |  |             |  | 6.13                     |  | 5.87  
|Interest rate spread(3)              |  |             |  |                          |  |       
|Group                                |  |             |  | 2.00                     |  | 2.05  
|Domestic                             |  |             |  | 1.85                     |  | 1.85  
|Foreign                              |  |             |  | 2.35                     |  | 2.46  
|Net interest margin(4)               |  |             |  |                          |  |       
|Group                                |  |             |  | 2.38                     |  | 2.45  
|Domestic                             |  |             |  | 2.17                     |  | 2.17  
|Foreign                              |  |             |  | 2.83                     |  | 3.08  
|                                     |  |             |  | December 31,            
|                                     |  |             |  | 2005                     |  | 2004  
|                                     |  |             |  | (Euro in millions)      
|Average interest earning assets      |  |             |  |                         
|Group                                |  |             |  | 106,380                  |  | 84,541
|Domestic                             |  |             |  | 73,057                   |  | 58,298
|Foreign                              |  |             |  | 33,323                   |  | 26,243

---

|(1) | The gross yields, spreads and margins presented in this table are extracted from the average
balance sheets and interest rates presented on page 26 of this Report and this breakdown into domestic and foreign has been compiled on the basis of location of office.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Gross yield represents the average interest rate earned on interest earning assets.
|--- | -----------------------------------------------------------------------------------



|(3) | Interest rate spread represents the difference between the average interest rate earned on
interest earning assets and the average interest rate paid on interest bearing liabilities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Net interest margin represents net interest income as a percentage of average interest
earning assets.
|--- | ------------------------------------------------------------------------------------------------------



25



---

##### Table of Contents

|                                                           |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|---------------------------------------------------------- |  | ----------------------------------------------------------------- |  | -------- |  | ------------------ |  | -------------- |  | -------- |  | -----------
|                                                           |  | Average Balance Sheet and Interest
Rates Years ended December 31,
|                                                           |  | 2005                                                              |  | 2004    
|                                                           |  | AverageBalance                                                    |  | Interest |  | AverageRate        |  | AverageBalance |  | Interest |  | AverageRate
|                                                           |  | (Euro in millions)                                                |  | %        |  | (Euro in millions) |  | %             
|ASSETS                                                     |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Loans and receivables to banks                             |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 4,596                                                             |  | 117      |  | 2.5                |  | 2,857          |  | 70       |  | 2.4        
|Foreign offices                                            |  | 1,131                                                             |  | 50       |  | 4.4                |  | 824            |  | 28       |  | 3.4        
|Loans and receivables to customers(1)                      |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 47,806                                                            |  | 2,084    |  | 4.4                |  | 38,540         |  | 1,625    |  | 4.2        
|Foreign offices                                            |  | 27,664                                                            |  | 1,768    |  | 6.4                |  | 21,397         |  | 1,260    |  | 5.9        
|Trading portfolio financial assets                         |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 7,786                                                             |  | 257      |  | 3.3                |  | 5,890          |  | 193      |  | 3.3        
|Foreign offices                                            |  | 1,308                                                             |  | 48       |  | 3.7                |  | 1,139          |  | 39       |  | 3.4        
|Financial Investments available for sale                   |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 12,869                                                            |  | 470      |  | 3.7                |  | 11,011         |  | 431      |  | 3.9        
|Foreign offices                                            |  | 3,220                                                             |  | 177      |  | 5.5                |  | 2,883          |  | 213      |  | 7.4        
|Total interest earning assets                              |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 73,057                                                            |  | 2,928    |  | 4.0                |  | 58,298         |  | 2,319    |  | 4.0        
|Foreign offices                                            |  | 33,323                                                            |  | 2,043    |  | 6.1                |  | 26,243         |  | 1,540    |  | 5.9        
|Net interest on swaps                                      |  |                                                                   |  | 125      |  |                    |  |                |  | 48       |  |            
|                                                           |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|                                                           |  | 106,380                                                           |  | 5,096    |  | 4.8                |  | 84,541         |  | 3,907    |  | 4.6        
|Non-interest earning assets                                |  | 13,209                                                            |  |         |  |                   |  | 10,421         |  |         |  |           
|                                                           |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Total assets                                               |  | 119,589                                                           |  | 5,096    |  | 4.3                |  | 94,962         |  | 3,907    |  | 4.1        
|                                                           |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Percentage of assets applicable to foreign activities      |  |                                                                   |  |          |  | 31.1               |  |                |  |          |  | 31.3       
|                                                           |  |                                                                   |  |          |  |                   
|LIABILITIES AND STOCKHOLDERS EQUITY                       |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Due to banks                                               |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 25,288                                                            |  | 693      |  | 2.7                |  | 20,288         |  | 555      |  | 2.7        
|Foreign offices                                            |  | 1,963                                                             |  | 81       |  | 4.1                |  | 2,732          |  | 91       |  | 3.3        
|Due to customers                                           |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 27,820                                                            |  | 473      |  | 1.7                |  | 23,795         |  | 363      |  | 1.5        
|Foreign offices                                            |  | 18,545                                                            |  | 642      |  | 3.5                |  | 14,780         |  | 462      |  | 3.1        
|Other debt issued                                          |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 7,001                                                             |  | 171      |  | 2.4                |  | 3,395          |  | 77       |  | 2.3        
|Foreign offices                                            |  | 8,486                                                             |  | 374      |  | 4.4                |  | 3,942          |  | 178      |  | 4.5        
|Subordinated liabilities                                   |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 2,925                                                             |  | 132      |  | 4.5                |  | 2,513          |  | 109      |  | 4.3        
|Foreign offices                                            |  |                                                                  |  |         |  |                   |  |               |  |         |  |           
|Total interest bearing liabilities                         |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Domestic offices                                           |  | 63,034                                                            |  | 1,469    |  | 2.3                |  | 49,991         |  | 1,104    |  | 2.2        
|Foreign offices                                            |  | 28,994                                                            |  | 1,097    |  | 3.8                |  | 21,454         |  | 731      |  | 3.4        
|                                                           |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|                                                           |  | 92,028                                                            |  | 2,566    |  | 2.8                |  | 71,445         |  | 1,835    |  | 2.6        
|Non interest earning liabilities                           |  | 21,237                                                            |  |         |  |                   |  | 18,070         |  |         |  |           
|                                                           |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Total average liabilities                                  |  | 113,265                                                           |  | 2,566    |  | 2.3                |  | 89,515         |  | 1,835    |  | 2.0        
|Ordinary stockholders equity                              |  | 6,324                                                             |  |         |  |                   |  | 5,447          |  |         |  |           
|                                                           |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Total liabilities and stockholders equity                 |  | 119,589                                                           |  | 2,566    |  | 2.2                |  | 94,962         |  | 1,835    |  | 1.9        
|                                                           |  |                                                                   |  |          |  |                    |  |                |  |          |  |            
|Percentage of liabilities applicable to foreign activities |  |                                                                   |  |          |  | 30.7               |  |                |  |          |  | 29.1       



|(1) | Loans to customers include money market funds, unquoted securities and reverse repurchase
agreements.
|--- | -----------------------------------------------------------------------------------------------------



26



---

##### Table of Contents

The following table allocates changes in net interest income between volume and rate for the year ended
December 31, 2005 compared with the year ended December 31, 2004. Volume and rate variances have been calculated based on the movements in average balances over the period and changes in interest rates on average interest earning assets
and average interest bearing liabilities respectively. Changes due to a combination of volume and rate are allocated ratably to volume and rate.



|                                         |  |                                        |   |  |             |   |  |            |  
|---------------------------------------- |  | -------------------------------------- | - |  | ----------- | - |  | ---------- | -
|                                         |  | December 2005 over December 2004       |  
|                                         |  | Increase/(decrease) due to changes in: |  
|                                         |  | AverageVolume                          |   |  | AverageRate |   |  | Net Change |  
|                                         |  | (Euro in millions)                     |  
|INTEREST EARNING ASSETS                  |  |                                        |   |  |             |   |  |            |  
|Loans and receivables to banks           |  |                                        |   |  |             |   |  |            |  
|Domestic offices                         |  | 44                                     |   |  | 3           |   |  | 47         |  
|Foreign offices                          |  | 12                                     |   |  | 10          |   |  | 22         |  
|Loans and receivables to customers       |  |                                        |   |  |             |   |  |            |  
|Domestic offices                         |  | 447                                    |   |  | 89          |   |  | 536        |  
|Foreign offices                          |  | 394                                    |   |  | 114         |   |  | 508        |  
|Trading portfolio financial assets       |  |                                        |   |  |             |   |  |            |  
|Domestic offices                         |  | 64                                     |   |  |            |   |  | 64         |  
|Foreign offices                          |  | 6                                      |   |  | 3           |   |  | 9          |  
|Financial investments available-for-sale |  |                                        |   |  |             |   |  |            |  
|Domestic offices                         |  | 56                                     |   |  | (17         | ) |  | 39         |  
|Foreign offices                          |  | 30                                     |   |  | (66         | ) |  | (36        | )
|                                         |  |                                        |   |  |             |   |  |            |  
|Total interest income                    |  | 1,053                                  |   |  | 136         |   |  | 1,189      |  
|                                         |  |                                        |   |  |             |   |  |            |  
|INTEREST EARNING LIABILITIES             |  |                                        |   |  |             |   |  |            |  
|Due to banks                             |  |                                        |   |  |             |   |  |            |  
|Domestic offices                         |  | 138                                    |   |  |            |   |  | 138        |  
|Foreign offices                          |  | (80                                    | ) |  | 70          |   |  | (10        | )
|Due to customers                         |  |                                        |   |  |             |   |  |            |  
|Domestic offices                         |  | 61                                     |   |  | 49          |   |  | 110        |  
|Foreign offices                          |  | 120                                    |   |  | 60          |   |  | 180        |  
|Other debt issued                        |  |                                        |   |  |             |   |  |            |  
|Domestic offices                         |  | 91                                     |   |  | 3           |   |  | 94         |  
|Foreign offices                          |  | 200                                    |   |  | (4          | ) |  | 196        |  
|Subordinated liabilities                 |  |                                        |   |  |             |   |  |            |  
|Domestic offices                         |  | 18                                     |   |  | 5           |   |  | 23         |  
|Foreign offices                          |  |                                       |   |  |            |   |  |           |  
|                                         |  |                                        |   |  |             |   |  |            |  
|Total interest expense                   |  | 548                                    |   |  | 183         |   |  | 731        |  
|                                         |  |                                        |   |  |             |   |  |            |  
|Net interest income                      |  |                                        |   |  |             |   |  |            |  
|Domestic offices                         |  | 303                                    |   |  | 18          |   |  | 321        |  
|Foreign offices                          |  | 202                                    |   |  | (65         | ) |  | 137        |  
|                                         |  |                                        |   |  |             |   |  |            |  
|Net interest income                      |  | 505                                    |   |  | (47         | ) |  | 458        |  
|                                         |  |                                        |   |  |             |   |  |            |  



27



---

##### Table of Contents

Other income

The
following table shows other income for the years ended December 31, 2005 and 2004.



|                                                       |  |                          |   |  |  |  |                   |   |  |  |  |          |   |  |                                       
|------------------------------------------------------ |  | ------------------------ | - |  |  |  | ----------------- | - |  |  |  | -------- | - |  | --------------------------------------
|                                                       |  | Years ended December 31,
|                                                       |  | 2005IFRS                 |   |  |  |  | 2004Pro-formaIFRS |   |  |  |  | 2004IFRS |   |  | Underlying %change 2005 vPro-forma2004
|                                                       |  | (Euro in millions)      
|Dividend income                                        |  | 17                       |   |  |  |  | 27                |   |  |  |  | 27       |   |  | -41                                   
|Banking fees and commissions                           |  | 863                      |   |  |  |  | 810               |   |  |  |  | 912      |   |  | 5                                     
|Investment banking and asset management fees           |  | 198                      |   |  |  |  | 155               |   |  |  |  | 155      |   |  | 23                                    
|Fee and commission income(1)                           |  | 1,061                    |   |  |  |  | 965               |   |  |  |  | 1,067    |   |  | 8                                     
|Less: fee and commission expense                       |  | (145                     | ) |  |  |  | (131              | ) |  |  |  | (131     | ) |  | 7                                     
|Trading income(2)                                      |  | 119                      |   |  |  |  | 95                |   |  |  |  | 95       |   |  | 25                                    
|Currency hedging (losses) / profits                    |  | (13                      | ) |  |  |  | 1                 |   |  |  |  | 1        |   |  |                                      
|Hedging volatility (arising under IAS 39)              |  | 6                        |   |  |  |  |                  |   |  |  |  |         |   |  |                                      
|Trading income                                         |  | 112                      |   |  |  |  | 96                |   |  |  |  | 96       |   |  | 16                                    
|Profit on termination of off balance sheet instruments |  |                         |   |  |  |  | 36                |   |  |  |  | 36       |   |  |                                      
|Other                                                  |  | 72                       |   |  |  |  | 73                |   |  |  |  | 73       |   |  | -6                                    
|Other operating income(3)                              |  | 72                       |   |  |  |  | 109               |   |  |  |  | 109      |   |  | -37                                   
|                                                       |  |                          |   |  |  |  |                   |   |  |  |  |          |   |  |                                       
|Total other income                                     |  | 1,117                    |   |  |  |  | 1,066             |   |  |  |  | 1,168    |   |  | 4                                     
|                                                       |  |                          |   |  |  |  |                   |   |  |  |  |          |   |  |                                       



|(1) | Includes fees and commissions related to foreign exchange activities which were 75 million and 70 million for 2005 and 2004 respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes dealing profits relating to foreign exchange activities, which were 59 million and 67 million for 2005 and 2004 respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes foreign exchange translation gains of 40 million and 35 million for 2005 and 2004 respectively.
|--- | ----------------------------------------------------------------------------------------------------------

Commentary on other income performance in 2005

In the year ended December 31, 2005 other income was 1,117 million, compared with 1,066 million on a pro-forma IFRS basis for the year ended December 31, 2004, an increase of 51 million.The increase reflects the
impact of currency factors of 22 million. Excluding currency factors, other income increased by 4%. Other income represented 30.6% of total income for 2005, compared with 32.8% in 2004.

Total fee and commission income was up 8%.

Banking fees and commissions were up 5%. The growth reflects increased business and transaction volumes in AIB Bank Republic of Ireland, GB & NI and Corporate Banking and there was good growth in credit card revenue in Ireland and
electronic business and payment fees in Poland.

Asset management and investment banking fees increased by 23% driven by particularly
strong performances in Goodbody stockbrokers,AIB Corporate Finance, Asset Management in Poland and BZWBKs brokerage operation.

Trading income increased with strong growth in bond management activities.Trading income excludes interest payable and receivable arising from these activities, which is included in net interest income.

Included in other income in 2004 was a gain of 36 million from closing out capital invested positions in January 2004 resulting from the
introduction of a new policy in respect of the investment of AIBs capital funds.

Loan arrangement fees for the year were strong and
are reported in the net interest income line under IFRS. The growth in other income no longer benefits from the growth in arrangement fees associated with strong lending growth.

Other income was 1,117 million in 2005 compared with 1,168 million in 2004 on an IFRS basis, a decrease of 51 million. The 51
million decrease includes 102 million of a decrease relating to the pro-forma adjustments of IAS 32 and 39.The remaining 51 million increase is commented on and analyzed above in the commentary on 2005 v pro-forma 2004.

Operating expenses

The following table shows operating expenses for
the years ended December 31, 2005 and 2004.



|                                                    |  |                          |  |  |  |                   |  |  |  |          |  |                                       
|--------------------------------------------------- |  | ------------------------ |  |  |  | ----------------- |  |  |  | -------- |  | --------------------------------------
|                                                    |  | Years ended December 31,
|                                                    |  | 2005IFRS                 |  |  |  | 2004Pro-formaIFRS |  |  |  | 2004IFRS |  | Underlying %change 2005 vPro-forma2004
|                                                    |  | (Euro in millions)      
|Personnel expenses                                  |  | 1,298                    |  |  |  | 1,136             |  |  |  | 1,136    |  | 13                                    
|General and administrative expenses                 |  | 583                      |  |  |  | 578               |  |  |  | 579      |  | -1                                    
|Depreciation(1)/amortization(2)                     |  | 130                      |  |  |  | 145               |  |  |  | 145      |  | -13                                   
|                                                    |  |                          |  |  |  |                   |  |  |  |          |  |                                       
|Total operating expenses before restructuring costs |  | 2,011                    |  |  |  | 1,859             |  |  |  | 1,860    |  | 7                                     
|                                                    |  |                          |  |  |  |                   |  |  |  |          |  |                                       
|Restructuring cost                                  |  |                         |  |  |  | 9                 |  |  |  | 9        |  |                                       
|                                                    |  |                          |  |  |  |                   |  |  |  |          |  |                                       
|Total operating expenses                            |  | 2,011                    |  |  |  | 1,868             |  |  |  | 1,869    |  |                                       
|                                                    |  |                          |  |  |  |                   |  |  |  |          |  |                                       



|(1) | Depreciation of property, plant and equipment.
|--- | ----------------------------------------------



|(2) | Amortization/impairment of intangible assets and impairment of goodwill.
|--- | ------------------------------------------------------------------------



28



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##### Table of Contents

Commentary on operating expenses in 2005

In the year ended December 31, 2005 operating expenses were 2,011 million, compared with 1,868 million on a pro-forma IFRS basis for the
year ended December 31, 2004, an increase of 143 million. The increase reflects restructuring costs of 9 million in 2004 and currency factors of 28 million. Excluding these items, operating expenses increased by 124
million or 7%.

The cost base in the comparative year to December 2004 included 14 million of investigation related costs. Excluding
these investigation related costs, operating expenses increased 8%. Of this increase one percentage point relates to other finance income included in operating expenses. Under IFRS, operating expenses include other finance income relating to the
return on pension fund assets and the cost of pension fund liabilities and this income reduced in 2005, increasing the growth in personnel expenses.

The remaining 7% increase reflects the very strong business volume and strong revenue growth in 2005. In the period there were costs to ensure compliance with a range of regulatory initiatives such as Sarbanes Oxley
and Basel II and there was higher performance related remuneration resulting from strong revenue growth. Excluding these items, the increase was 5%.The resourcing and restructuring of our single enterprise agenda is in implementation and we expect
this to increase business capability, improve efficiency and further enable compliance.

Productivity improved with the cost income ratio
reducing to 55.2% from 57.7% in 2004.

In 2005, personnel expenses were 1,298 million compared with 1,136 million in 2004, an
increase of 162 million.The increase includes currency factors of 13 million. Excluding these items, personnel expenses were up 13%. If the above mentioned decline in other finance income was excluded, personnel expenses were up 12%.The
increase reflected a higher level of variable costs arising from performance related remuneration resulting from strong revenue growth, the cost of additional resources to respond to business growth demands and ensure compliance with a range of
regulatory initiatives such as Sarbanes Oxley and Basel II and higher pension costs.

In 2005, general and administrative expenses were
583 million compared with 578 million in 2004, an increase of 5 million.The increase includes currency factors of 10 million. Excluding these items, general and administrative costs were down 1%. If investigation related
costs in 2004 were to be excluded general and administrative expenses were up 2%.The 2% increase includes the effects of inflation and consultancy and systems costs relating to the aforementioned strengthening of internal structures to ensure
compliance with new regulatory initiatives.

The depreciation charge for 2005 was 130 million compared with 145 million for
2004, a decrease of 15 million.The decrease includes currency factors of 5 million. Excluding this item, the depreciation charge was down 13%.The decrease reflects the benefit of some business rationalisations.

On an IFRS basis, productivity improved with the cost income ration reducing to 55.2% from 57.3% in 2004.

In the year ended December 2005, operating expenses were 2,011 million compared with 1,869 million in 2004 on an IFRS basis, an increase of
142 million. Of the 142 million increase, 1 million of a decrease relates to the pro-forma adjustments of IAS 32 and 39.The remaining 143 million increase is commented on and analyzed above in the commentary on 2005 v
pro-forma 2004.

Provisions for loan losses

The following table shows the provisions for loan losses charged to income for each of the two years ended December 31, 2005 and 2004.



|                                    |  |                          |   |  |      |  
|----------------------------------- |  | ------------------------ | - |  | ---- | -
|                                    |  | Years ended December 31, |  
|                                    |  | 2005                     |   |  | 2004 |  
|                                    |  | (Euro in millions)       |  
|Provisions for loan losses          |  | 115                      |   |  | 116  |  
|                                    |  |                          |   |  |      |  
|As a percentage of average loans(1) |  | 0.15                     | % |  | 0.20 | %
|                                    |  |                          |   |  |      |  

---

|(1) | Average loans, before provisions less unearned income, include leasing and installment credit.
|--- | ----------------------------------------------------------------------------------------------

Please also see Provision and allowance for loan losses on pages 76 and 78,Net loans charged off on pages 78 and 79 and Impaired
loans on page 83



29



---

##### Table of Contents

Commentary on provision for loan losses in 2005

The provisions for loan losses of 115 million (0.15% of average advances) for the year ended December 31, 2005 were 1 million lower than 2004 (116
million, 0.20% of average advances). The provisions reflect the continuing strong trends in credit quality throughout the Group including lower levels of new provisions and a high level of recoveries. The 2005 provision includes 97 million of
specific provisions and 18 million of IBNR provisions (influenced by advances growth) compared with a specific provisions charge of 116 million in 2004.

Ireland

Provision for loan losses decreased by 7 million to 43 million in the year to
December 31, 2005 (2004: 50 million). A small increase in the ROI Commercial/Retail loan book (2 million) was more than offset by a reduction in provisions in the Capital Markets division (9 million) where there was a net
recovery of 3 million in 2005 compared with a net provision charge of 6 million in 2004.

United Kingdom

In 2005, the provision increased by 15 million to 53 million (2004: 38 million). The increase in GB/NI division was 7 million
reflecting lower levels of new provisions and very strong recoveries offset by an addition to IBNR provisions of 12 million, largely implemented by advances growth, compared to 2004 when no addition to IBNR provisions was made. In Capital
Markets UK the increase was 8 million reflecting higher levels of new provisions and lower recoveries.

United States

There was a net provision in the Capital Markets portfolio of 3 million in 2005 compared with a net recovery of 0.5 million relating to
the not-for-profit portfolio in 2004.

Poland

Provision for loans losses for the year to December 31, 2005 at 15 million was 15 million lower than the year to December 31, 2004. The reduction in the 2005 provision reflects stronger recoveries and low levels of
provisions in the business and retail portfolios.

Rest of the World

The provision for loan losses for the year to December 31,2005 was 2 million in Capital Markets Europe.

Commentary on provision for loan losses in 2004

The provisions for loan losses of 116 million (0.20% of
average advances) for the year ended December 31, 2004 were 36 million lower than 2003 (152 million, 0.31% of average advances).The reduction was influenced by the improved credit quality trends and continued strong recoveries. In
addition, the 2003 provision included 10 million of a provision charge for Allfirst and a General provision charge of 15 million. No addition was made to General provisions in 2004 given the improved trends mentioned.

Ireland

The provision for loan losses decreased by
14 million to 50 million in the year to December 31, 2004 (2003: 64 million). Excluding the 5 million unallocated provision created in 2003, provisions reduced by 9 million reflecting a net decrease in ROI division
of 15 million due to lower levels of provisions in the commercial loan books with an increase in provisions made in the Capital Markets division of 6 million. No additional General provisions were created in the period and both divisions
benefited from strong recoveries.

United Kingdom

In 2004, the provision for loan losses at 38 million was 11 million lower than the year to December 31, 2003.This decrease was influenced by the fact that there was no additions to General Provisions
in the period due to the improved credit quality of the portfolios in both GB/NI and Capital Markets divisions (9 million General Provision created in GB/NI division in 2003). The provision charge in Capital Markets was 4 million lower
than 2003 and included the addition of a small number of new non-performing loans and associated provisions in the Manufacturing and Other Services sectors.

United States

There was a net recovery of 0.5 million for the year to December 31, 2004 compared with a charge
of 7 million in 2003, reflecting the very strong credit quality of the portfolio.The 2003 charge included Allfirst prior to disposal and also the allocation to debt securities of 6 million from general provisions.

Poland

The provision for loan losses for the year to
December 31, 2004 at 30 million was 2 million lower than the year to December 31, 2003. This reduction included a 4 million general provision release, higher provisioning in the corporate book and an improved provisioning
experience in the Retail and Commercial portfolios.



30



---

##### Table of Contents

Provisions for contingent liabilities and commitments



|                                                      |  |                          |  |     
|----------------------------------------------------- |  | ------------------------ |  | ----
|                                                      |  | Years ended December 31,
|                                                      |  | 2005                     |  | 2004
|                                                      |  | (Euro in millions)      
|Provisions for contingent liabilities and commitments |  | 20                       |  | 20  
|                                                      |  |                          |  |     

The provision for contingent liabilities and commitments remained at 20 million in 2005.

Amounts written off/(written back) fixed asset investments



|                                            |  |                          |  |      |  
|------------------------------------------- |  | ------------------------ |  | ---- | -
|                                            |  | Years ended December 31, | 
|                                            |  | 2005                     |  | 2004 |  
|                                            |  | (Euro in millions)       | 
|Amounts written off fixed asset investments |  | 8                        |  | (1   | )
|                                            |  |                          |  |      |  

The provision for amounts written off fixed asset investments increased from a net credit of
1 million in 2004 to 8 million in 2005.

Gain on disposal of businesses

2005

The gain on disposal of businesses in 2005 amounting to 5 million relates to the
sale of Community Counselling Services of 4 million (tax charge 1 million), and the deferred consideration of 1 million (tax charge 0.3 million), arising from the sale of the Govett business in 2003.

2004

The gain on disposal of business in 2004
amounting to 17 million relates to the sale of BZWBKs subsidiary, Cardpoint S.A. of 13 million (tax charge 2 million), and the deferred consideration of 4 million (tax charge 1 million), arising from the sale of
the Govett business in 2003.

Applicable taxes

The following table shows applicable income taxes and tax rates, as well as effective tax rates, for the years ended December 31, 2005 and 2004.



|                           |  |                          |   |  |      |  
|-------------------------- |  | ------------------------ | - |  | ---- | -
|                           |  | Years ended December 31, |  
|                           |  | 2005                     |   |  | 2004 |  
|                           |  | (Euro in millions)       |  
|Applicable income taxes    |  | 319                      |   |  | 270  |  
|                           |  |                          |   |  |      |  
|Irish corporation tax rate |  | 12.5                     | % |  | 12.5 | %
|Effective tax rate         |  | 18.7                     | % |  | 19.4 | %

The taxation charge was 319 million, compared with 270 million in 2004. The adjusted
effective tax rate was 18.7% compared with 19.4% in 2004.The effective tax rate is influenced by the geographic mix of profits which are taxed at the rates applicable in the relevant jurisdictions where the Group operates.

Share of income of associated undertakings

The
income in 2005 was 149 million compared to 132 million in 2004 and mainly reflects AIBs average 23.5% share of the income after taxes of M&T Bank Corporation on an IFRS basis for the year to December 2005.

Balance sheet

Risk weighted assets, loans to customers
and customer accounts(excluding currency factors)



|                                            |  |                              |  |                           |  |                             
|------------------------------------------- |  | ---------------------------- |  | ------------------------- |  | ----------------------------
|% change December 31,2005 v January 1, 2005 |  | Risk weightedassets % Change |  | Loans tocustomers% Change |  | Customer(1)accounts % Change
|AIB Bank Republic of Ireland                |  | 25                           |  | 28                        |  | 20                          
|AIB Bank GB & NI                            |  | 32                           |  | 29                        |  | 17                          
|Capital Markets                             |  | 23                           |  | 29                        |  | 4                           
|Poland                                      |  | 4                            |  | 4                         |  | 8                           
|                                            |  |                              |  |                           |  |                             
|AIB Group                                   |  | 24                           |  | 27                        |  | 16                          
|                                            |  |                              |  |                           |  |                             



|(1) | Excludes money market funds.
|--- | ----------------------------



31



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##### Table of Contents

Balance sheet

Total
assets amounted to 133 billion at December 31, 2005 compared to 103 billion at January 1, 2005. Adjusting for the impact of currency, total assets were up 26% and loans to customers were up 27% since January 1, 2005 while
customer accounts increased by 16%. Risk weighted assets excluding currency factors increased by 24% to 102 billion.

Outlook

The business is expected to continue to perform strongly in 2006 in line with our strong positions in the high growth markets where the Group operates.
Very good loan and deposit growth and strong asset quality is expected again this year. The resourcing and restructuring of the enterprise wide approach to operations is in implementation and the Group expects this to further bolster its business
capability. Based on these factors the guidance is for mid to high teens earnings per share growth in 2006 compared with the adjusted basic earnings per share of EUR145.9c in 2005 (as outlined on page 124 of this report). This guidance excludes the
one-time gain to be recognized from the Ark Life joint venture with Hibernian Life & Pensions and the benefit from the development of the Bankcentre complex.

Performance by division

On a divisional basis income is measured in euro and consequently includes the impact of
currency movements.

Income before taxes by division for the years ended December 31, 2005 and 2004 were as follows:



|                       |  |                          |  |                   |  |         
|---------------------- |  | ------------------------ |  | ----------------- |  | --------
|                       |  | Years ended December 31,
|                       |  | 2005IFRS                 |  | 2004Proforma IFRS |  | 2004IFRS
|                       |  | (Euro in millions)      
|Income before taxes(1) |  |                          |  |                   |  |         
|AIB Bank ROI           |  | 779                      |  | 654               |  | 657     
|AIB Bank GB & NI       |  | 322                      |  | 274               |  | 288     
|Capital Markets        |  | 403                      |  | 317               |  | 326     
|Poland                 |  | 132                      |  | 101               |  | 103     
|Group                  |  | 70                       |  | 55                |  | 22      
|                       |  |                          |  |                   |  |         
|AIB Group              |  | 1,706                    |  | 1,401             |  | 1,396   
|                       |  |                          |  |                   |  |         



|(1) | The business segment information is based on management accounts information. Interest income
on capital is allocated to the divisions on the basis of the capital required to support the level of risk weighted assets. Interest income earned on capital not allocated to divisions is reported in Group.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



32



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##### Table of Contents

AIB Bank ROI division

AIB Bank ROI: Retail and commercial banking operations in Ireland, Channel Islands and Isle of Man;AIB Finance and Leasing and Card Services.



|                                            |  |                          |   |  |                   |   |  |          |   |  |                                         
|------------------------------------------- |  | ------------------------ | - |  | ----------------- | - |  | -------- | - |  | ----------------------------------------
|                                            |  | Years ended December 31,
|                                            |  | 2005IFRS                 |   |  | 2004Pro-formaIFRS |   |  | 2004IFRS |   |  | Underlying %change 2005 v Pro-forma 2004
|                                            |  | (Euro in millions)      
|AIB Bank ROI income statement               |  |                         
|Net interest income                         |  | 1,314                    |   |  | 1,145             |   |  | 1,144    |   |  | 15                                      
|Other income                                |  | 376                      |   |  | 361               |   |  | 364      |   |  | 5                                       
|                                            |  |                          |   |  |                   |   |  |          |   |  |                                         
|Total operating income                      |  | 1,690                    |   |  | 1,506             |   |  | 1,508    |   |  | 12                                      
|Total operating expenses                    |  | 867                      |   |  | 814               |   |  | 813      |   |  | 7                                       
|                                            |  |                          |   |  |                   |   |  |          |   |  |                                         
|Operating income before provisions          |  | 823                      |   |  | 692               |   |  | 695      |   |  | 19                                      
|Provisions                                  |  | 55                       |   |  | 44                |   |  | 44       |   |  | 25                                      
|                                            |  |                          |   |  |                   |   |  |          |   |  |                                         
|Operating income                            |  | 768                      |   |  | 648               |   |  | 651      |   |  | 19                                      
|Share of results of associated undertakings |  | (1                       | ) |  | (1                | ) |  | (1       | ) |  |                                        
|Income on disposal of property              |  | 12                       |   |  | 7                 |   |  | 7        |   |  | 68                                      
|                                            |  |                          |   |  |                   |   |  |          |   |  |                                         
|Income before taxes                         |  | 779                      |   |  | 654               |   |  | 657      |   |  | 19                                      
|                                            |  |                          |   |  |                   |   |  |          |   |  |                                         

2005 performance

Income before taxes, on a pro-forma IFRS basis, increased by 19% or 15% excluding the 26 million of investigation related charges incurred in the year to December 2004. Operating income was up 12% and operating
expenses were up 7%. Excluding the investigation related charges these growth rates were 11% and 8% respectively, with the growth in operating income exceeding the growth in operating expenses by 3%.

The strong income before taxes growth was generated through higher business volumes and from the focus on customer relationship management. Loans and
deposits increased by 28% and 20% respectively since 31 December 2004. Operating expenses were up 7% (or 8% excluding investigation related costs in 2004). Increased business activity, annual salary inflation, performance costs related to
strong revenue growth and costs associated with a number of mandatory and regulatory driven projects were the key drivers of the 7% increase. Additional pension costs in 2005 accounted for 1% of the operating expenses growth. The cost income ratio
was 51.3% compared with 54.1% in 2004 (52.7% excluding the 26 million of investigation related charges incurred in 2004). Asset quality remained very good with the provision charge as a percentage of average loans reducing to 0.11% from 0.14%
in 2004.

Retail banking reported another very strong year reflecting good growth in income on the back of a significant increase in
business volumes on both sides of the balance sheet. Business lending, home mortgages, personal lending and private banking activities all experienced excellent growth, with strong growth in customer deposits also reflecting buoyant customer demand.
Income before taxes growth in AIB Card Services was also notable, resulting from strong revenue due to higher consumer spending, a strong increase in merchant turnover, lower costs and a lower bad debt charge. In AIB Finance and Leasing there was
good profit growth due to a 14% increase in loan volumes since December 2004 and tight cost management. New business was particularly strong in the motor, plant and equipment sectors.

On an IFRS basis, AIB Bank ROI income before taxes was 779 million in 2005 compared with 657 million in 2004 on an IFRS basis, an increase of
122 million. Of the 122 million increase, 3 million of a decrease relates to the pro-forma adjustments of IAS 32 and 39. The remaining 125 million increase is commented on and analyzed above in the commentary on 2005 v
pro-forma 2004.



33



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##### Table of Contents

AIB Bank GB & NI division

Retail and commercial banking operations in Great Britain and Northern Ireland.



|                                   |  |                          |  |                   |  |          |  |                                        
|---------------------------------- |  | ------------------------ |  | ----------------- |  | -------- |  | ---------------------------------------
|                                   |  | Years ended December 31,
|                                   |  | 2005IFRS                 |  | 2004Pro-formaIFRS |  | 2004IFRS |  | Underlying %change 2005 vPro-forma 2004
|                                   |  | (Euro in millions)      
|AIB Bank GB & NI income statement  |  |                         
|Net interest income                |  | 516                      |  | 447               |  | 416      |  | 16                                     
|Other income                       |  | 148                      |  | 142               |  | 189      |  | 5                                      
|                                   |  |                          |  |                   |  |          |  |                                        
|Total operating income             |  | 664                      |  | 589               |  | 605      |  | 13                                     
|Total operating expenses           |  | 323                      |  | 303               |  | 305      |  | 7                                      
|                                   |  |                          |  |                   |  |          |  |                                        
|Operating income before provisions |  | 341                      |  | 286               |  | 300      |  | 20                                     
|Provisions                         |  | 21                       |  | 13                |  | 13       |  | 61                                     
|                                   |  |                          |  |                   |  |          |  |                                        
|Operating income                   |  | 320                      |  | 273               |  | 287      |  | 18                                     
|Income on disposal of property     |  | 2                        |  | 1                 |  | 1        |  |                                       
|                                   |  |                          |  |                   |  |          |  |                                        
|Income before taxes                |  | 322                      |  | 274               |  | 288      |  | 18                                     
|                                   |  |                          |  |                   |  |          |  |                                        

2005 performance

AIB Bank GB & NI income before taxes was 322 million in 2005 compared with 274 million on a pro-forma IFRS basis in 2004. Excluding currency factors of 1 million, income before taxes was up
18%. Loan and deposit balances increased by 29% and 17% respectively in 2005 with volume growth reflecting buoyant business momentum. Lending margins were well managed in a very competitive environment. Operating expenses were up 7% mainly due to
staff cost increases relating to ongoing investment in the business. The cost income ratio improved to 48.7% from 51.5% last year. The bad debt charge represented 0.13% of average loans, compared with 0.11% of average loans in 2004. Credit quality
remains robust in a relatively benign economic climate.

Allied Irish Bank (GB), with its primary focus on chosen business sectors,
achieved income before taxes growth of 25% to 169 million, a very strong performance, with growth in balances of 31% in loans and 21% in deposits. The bank continues to grow its business customer base as a key provider of banking to
mid-corporate businesses through its relationship-banking model and continued expansion. In 2005, the opening of a corporate office in the regenerated Birmingham city centre demonstrated the increasing profile of Allied Irish Bank (GB).

First Trust Bank, a retail bank in Northern Ireland, also reported double-digit growth, with an 11% increase in income before taxes to 153
million, compared with 2004. Loan balances showed strong growth of 25% and solid deposit growth of 12% was achieved. First Trust continues to develop both its business and personal customer bases.

AIB Bank GB & NI income before taxes was 322 million in 2005 compared with 288 million in 2004 on an IFRS basis, an increase of
34 million. Of the 34 million increase, 14 million of a decrease relates to the pro-forma adjustments of IAS 32 and 39. The remaining 48 million increase is commented on and analyzed above in the commentary on 2005 v
pro-forma 2004.



34



---

##### Table of Contents

Capital Markets division

Capital Markets division comprises of Corporate Banking, Global Treasury and Investment Banking.



|                                            |  |                          |  |                   |  |          |  |                                   
|------------------------------------------- |  | ------------------------ |  | ----------------- |  | -------- |  | ----------------------------------
|                                            |  | Years ended December 31,
|                                            |  | 2005IFRS                 |  | 2004Pro-formaIFRS |  | 2004IFRS |  | Underlying %change 2005 vPro-forma
|                                            |  | (Euro in millions)      
|2004                                        |  |                         
|Capital Markets income statement            |  |                         
|Net interest income                         |  | 435                      |  | 396               |  | 360      |  | 10                                
|Other income                                |  | 407                      |  | 345               |  | 390      |  | 18                                
|                                            |  |                          |  |                   |  |          |  |                                   
|Total operating income                      |  | 842                      |  | 741               |  | 750      |  | 14                                
|Total operating expenses                    |  | 400                      |  | 403               |  | 403      |  | -1                                
|                                            |  |                          |  |                   |  |          |  |                                   
|Operating income before provisions          |  | 442                      |  | 338               |  | 347      |  | 31                                
|Provisions                                  |  | 46                       |  | 29                |  | 29       |  | 59                                
|                                            |  |                          |  |                   |  |          |  |                                   
|Operating income                            |  | 396                      |  | 309               |  | 318      |  | 28                                
|Share of results of associated undertakings |  | 2                        |  | 4                 |  | 4        |  | -44                               
|Income on disposal of business              |  | 5                        |  | 4                 |  | 4        |  | 12                                
|                                            |  |                          |  |                   |  |          |  |                                   
|Income before taxes                         |  | 403                      |  | 317               |  | 326      |  | 27                                
|                                            |  |                          |  |                   |  |          |  |                                   

2005 performance

Capital Markets income before taxes was 403 million in 2005 compared with 317 million on a pro-forma IFRS basis in 2004, a 27% increase, reflecting a very strong performance across each business area.

The performance in Corporate Banking was particularly strong with pre-tax profit up 33% on the comparative out-turn for 2004. Significant
loan growth was experienced in both the domestic and international businesses with advances increasing by 29% since December 2004. The unit continued to invest heavily in expanding its international and specialised loan businesses which are
experiencing very strong growth. Corporate banking retains a rigorous and conservative approach to credit risk management and continually seeks to optimise value in a quality loan portfolio.

Global Treasury performed strongly in 2005 following the outstanding performance in its markets business in 2004. Despite difficult interest rate and
foreign exchange markets experienced in 2005, Global Treasury closed the year with income before taxes marginally ahead (up 2%) of 2004. The customer business performed robustly, showing strong growth over the comparative period underpinning Global
Treasurys leading position in the Republic of Ireland. Strong growth was also experienced in the investment books and bond activities with short term trading activities performing behind the very strong prior year.

Investment Banking income before taxes was up 22%, substantially ahead of 2004. The strong income before taxes growth and activity experienced in
stockbroking services, equity trading, corporate advisory and structured investments were once again underpinned by the market share positions held by each of these businesses.

The income before taxes split by business unit in 2005 was Corporate Banking 55%, Global Treasury 29% with Investment Banking and Allied Irish America
comprising the remainder.

The divisional cost income ratio decreased to 47.5% from 54.4% in 2004. Strong cost management control coupled
with selective business rationalisation enabled the division to retain costs at the 2004 levels.

The bad debt provision charge decreased
to 0.22% of average loans from 0.27% in 2004. Total provisions increased due to a higher nominal bad debt charge, higher investment provisions and some onerous lease charges on premises.

Capital Markets income before taxes was 403 million in 2005 compared with 326 million in 2004 on an IFRS basis, an increase of 77
million. Of the 77 million increase, 9 million of a decrease relates to the pro-forma adjustments of IAS 32 and 39. The remaining 86 million increase is commented on and analyzed above in the commentary on 2005 v pro-forma 2004.

Poland

Bank Zachodni WBK
(BZWBK), in which AIB has a 70.5% shareholding, together with its subsidiaries and associates. BZWBK Wholesale Treasury and a share of Investment Banking subsidiaries results are reported in Capital Markets division.



|                                            |  |                          |  |                   |  |          |  |                                        
|------------------------------------------- |  | ------------------------ |  | ----------------- |  | -------- |  | ---------------------------------------
|                                            |  | Years ended December 31,
|                                            |  | 2005IFRS                 |  | 2004Pro-formaIFRS |  | 2004IFRS |  | Underlying %change 2005 vPro-forma 2004
|                                            |  | (Euro in millions)      
|Poland income statement                     |  |                         
|Net interest income                         |  | 205                      |  | 180               |  | 174      |  | 1                                      
|Other income                                |  | 222                      |  | 180               |  | 188      |  | 10                                     
|                                            |  |                          |  |                   |  |          |  |                                        
|Total operating income                      |  | 427                      |  | 360               |  | 362      |  | 6                                      
|Total operating expenses                    |  | 280                      |  | 245               |  | 245      |  | 3                                      
|                                            |  |                          |  |                   |  |          |  |                                        
|Operating income before provisions          |  | 147                      |  | 115               |  | 117      |  | 11                                     
|Provisions                                  |  | 15                       |  | 29                |  | 29       |  | -54                                    
|                                            |  |                          |  |                   |  |          |  |                                        
|Operating profit                            |  | 132                      |  | 86                |  | 88       |  | 33                                     
|Share of results of associated undertakings |  |                         |  | 1                 |  | 1        |  |                                       
|Income on disposal of property              |  |                         |  | 1                 |  | 1        |  |                                       
|Income on disposal of business              |  |                         |  | 13                |  | 13       |  |                                       
|                                            |  |                          |  |                   |  |          |  |                                        
|Income before taxes                         |  | 132                      |  | 101               |  | 103      |  | 13                                     
|                                            |  |                          |  |                   |  |          |  |                                        



35



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##### Table of Contents

2005 performance

Poland income before taxes was 132 million in 2005 compared with 101 million on a pro-forma IFRS basis in 2004. Excluding currency factors of 13 million, the income before taxes on a local currency
basis increased by 13%.

Total operating income increased by 6% with net interest income increasing by 1% and other income increasing by
10%. Average interest rates were lower in 2005 following a 2% reduction in the reference rate during the year to 4.5% at 31 December 2005. Performing loans to customers increased by 5% since December 2004 with total loans to customers up 4%.
Overall the business lending market in Poland was subdued with higher liquidity levels and increased competition resulting in stagnant business lending year on year. Personal lending grew strongly where cash loans in particular were in demand.
Lending margins increased as a result of improved mix in the portfolio. Customer deposits increased by 8% with margins decreasing as a result of lower interest rates, changing mix and increased competition.

Other income grew by 10%. The main area of growth was asset management fees with mutual funds income increasing by 115% and a continued favourable mix in
funds managed, with market share increasing from 7.5% to 12.6%. The brokerage business enjoyed an excellent year with substantial increases in turnover, buoyed by the performance of the Warsaw Stock Exchange in 2005. E-business and payment fees and
foreign exchange income contributed to a strong growth level.

Operating expenses were up 3% reflecting higher staff costs due to increased
performance related pay, while savings were realised in operating expenses.

Provisioning reduced further compared with 2004. The charge as
a percentage of average loans declined from 0.91% to 0.40% in 2005. The downward trend in impaired loans as a percentage of total loans continued from 8.4% at 31 December 2004 to 6.8% at the end of December 2005.

Polands income before taxes was 132 million in 2005 compared with 103 million in 2004 on an IFRS basis, an increase of 29
million. Of the 29 million increase, 2 million of a decrease relates to the pro-forma adjustments of IAS 32 and 39. The remaining 31 million increase is commented on and analyzed above in the commentary on 2005 v pro-forma 2004.

Group

Group includes
interest income earned on capital not allocated to divisions, the funding cost of certain acquisitions, hedging in relation to the translation of foreign locations profit, unallocated costs of Enterprise Technology and central services and the
contribution from AIBs share of approximately 23.5% in M&T Bank Corporation.



|                                                   |  |                          |   |  |                   |   |  |          |  
|-------------------------------------------------- |  | ------------------------ | - |  | ----------------- | - |  | -------- | -
|                                                   |  | Years ended December 31, |  
|                                                   |  | 2005IFRS                 |   |  | 2004Pro-formaIFRS |   |  | 2004IFRS |  
|                                                   |  | (Euro in millions)       |  
|Group income statement                             |  |                          |  
|Net interest income                                |  | 60                       |   |  | 10                |   |  | (22      | )
|Other income                                       |  | (36                      | ) |  | 38                |   |  | 37       |  
|                                                   |  |                          |   |  |                   |   |  |          |  
|Total operating income                             |  | 24                       |   |  | 48                |   |  | 15       |  
|Total operating expenses                           |  | 141                      |   |  | 103               |   |  | 103      |  
|                                                   |  |                          |   |  |                   |   |  |          |  
|Operating loss before provisions                   |  | (117                     | ) |  | (55               | ) |  | (88      | )
|Provisions                                         |  | 6                        |   |  | 18                |   |  | 18       |  
|                                                   |  |                          |   |  |                   |   |  |          |  
|Operating loss                                     |  | (123                     | ) |  | (73               | ) |  | (106     | )
|Share of results profit of associated undertakings |  | 148                      |   |  | 128               |   |  | 128      |  
|Construction contract income                       |  | 45                       |   |  |                  |   |  |         |  
|                                                   |  |                          |   |  |                   |   |  |          |  
|Income before taxation                             |  | 70                       |   |  | 55                |   |  | 22       |  
|                                                   |  |                          |   |  |                   |   |  |          |  

2005 performance

Group income before taxes of 70 million for the year to December 2005 compared with income before taxes of 55 million on a pro-forma IFRS basis in 2004.

Net interest income was up due to higher capital income resulting from increased capital balances (strong retained earnings) and the income generated
from investment of funds raised on a 1 billion perpetual preferred securities issue in December 2004. Other income was lower due to gains of 36 million in relation to closing out capital invested positions in 2004. Other income in 2005
includes economic hedging losses in relation to foreign currency translation exposure and capital management, and hedge volatility under IFRS.

Significant additional investment in resources to facilitate AIBs preparation for Basel II and Sarbanes Oxley were the main drivers of higher operating expenses. In addition, there was investment to further strengthen compliance and
internal audit structures and performance related costs were higher in line with strong revenue and profit growth.

AIBs share of
M&T net income in 2005 amounted to 148 million. On a local currency basis M&Ts contribution of US$ 185 million increased by 16% relative to the year to December 2004 of US$ 159 million. AIB benefited from a 23.5% share of
net income compared to a 22.7% share in the year to December 2004, primarily due to increased share buybacks by M&T. M&T reported its annual results on January 11, 2006, showing net income up 8% to US$ 782 million. US GAAP-basis
diluted earnings per share was up 12% to US$ 6.73 from US$ 6.00 in the year to December 2004. Diluted net operating earnings per share, which excludes the amortisation of core deposit and other intangibles, was US$ 7.03, up 10% from US$ 6.38.

Group income before taxes was 70 million in 2005 compared with 22 million in 2004 on an IFRS basis, an increase of
 48 million. Of the 48 million increase, 33 million relates to the pro-forma adjustments of IAS 32 and 39. The remaining  15 million increase is commented on and analyzed above in the commentary on 2005 v
pro-forma 2004.



36



---

##### Table of Contents

Reconciliation of statutory IFRS accounts (GAAP) to pro-forma IFRS accounts (Non-GAAP) for December 2004



|                                            |  |                    |  |        |   |  |              |   |  |                         |  |                  
|------------------------------------------- |  | ------------------ |  | ------ | - |  | ------------ | - |  | ----------------------- |  | -----------------
|                                            |  | IFRSYear2004       |  | EIR(1) |   |  | Insurance(2) |   |  | Financial(3)instruments |  | IFRSPro-forma2004
|                                            |  | (Euro in millions)
|Net interest income                         |  | 2,072              |  | 73     |   |  |             |   |  | 33                      |  | 2,178            
|Other income                                |  | 1,168              |  | (102   | ) |  |             |   |  |                        |  | 1,066            
|                                            |  |                    |  |        |   |  |              |   |  |                         |  |                  
|Total operating income                      |  | 3,240              |  | (29    | ) |  |             |   |  | 33                      |  | 3,244            
|Total operating expenses                    |  | 1,869              |  | (1     | ) |  |             |   |  |                        |  | 1,868            
|Provisions                                  |  | 133                |  |       |   |  |             |   |  |                        |  | 133              
|                                            |  |                    |  |        |   |  |              |   |  |                         |  |                  
|Operating income/(loss)                     |  | 1,238              |  | (28    | ) |  |             |   |  | 33                      |  | 1,243            
|Share of results of associated undertakings |  | 132                |  |       |   |  |             |   |  |                        |  | 132              
|Income on disposal of property              |  | 9                  |  |       |   |  |             |   |  |                        |  | 9                
|Income on disposal of business              |  | 17                 |  |       |   |  |             |   |  |                        |  | 17               
|                                            |  |                    |  |        |   |  |              |   |  |                         |  |                  
|Income before taxes                         |  | 1,396              |  | (28    | ) |  |             |   |  | 33                      |  | 1,401            
|                                            |  |                    |  |        |   |  |              |   |  |                         |  |                  
|Earnings per share - continuing             |  | 128.3c             |  | (2.5c  | ) |  |             |   |  |                        |  | 125.8c           
|Earnings per share - discontinued           |  | 6.2c               |  |       |   |  | (2.4c        | ) |  |                        |  | 3.8c             
|Basic earnings per share                    |  | 134.5c             |  | (2.5c  | ) |  | (2.4c        | ) |  |                        |  | 129.6c           



|(1) | (EIR) Effective interest rate (IAS 39). On transition, certain fees receivable, and fees and
commissions payable that had previously been taken to the profit and loss account were treated as deferred income and deferred costs and shown within loans and receivables. These deferred fees and costs are amortised on an effective interest basis
to the profit and loss account over the expected residual lives of the financial instruments. The change in policy gives rise to a reclassification from fee income / fee expense and administrative expenses to interest income with an impact on the
net interest margin. On a pro-forma basis the effective interest rate adjustment reduced profit before taxation by 28 million in 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Insurance business (IFRS 4 / IAS 39). Accounting for contracts meeting the IFRS definition of
insurance business is not impacted by IFRS 4. Accounting for investment products under IAS 39 serves to delay the recognition of income for a number of reasons. There is a narrower definition of costs that can be deferred on the sale of investment
products. Initial charges on sale of investment products are deferred and accrued over the expected life of the product. There is no opportunity to account for the future surpluses on an embedded value basis. As a consequence, there was a reduction
in equity on transition as the valuation of the discounted future earnings expected to emerge from the business currently in force in the balance sheet will decrease. Income will be recognised on these contracts in later periods due to the change in
the valuation basis. On a pro-forma basis the insurance business adjustment reduced earnings per share by 2.4c in 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Financial instruments (IAS 32 / IAS 39). Under IAS 32 and IAS 39, all debt securities are
classified and disclosed within one of the following four categories: held-to-maturity; available-for-sale; trading; or designated as fair value through the profit and loss account. Some of AIBs financial instruments, which were previously
held as financial fixed assets, are classified as available-for-sale on transition to IFRS. On a pro-forma basis, classification of financial instruments increased profit before taxation by 33 million in 2004.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

IFRS segmental pro-forma (Non-GAAP) information - continuing operations



|                                            |  |                       |   |  |                 |  |                |  |        |  |       |   |  |      
|------------------------------------------- |  | --------------------- | - |  | --------------- |  | -------------- |  | ------ |  | ----- | - |  | -----
|                                            |  | Year 31 December 2004
|                                            |  | AIB BankROI           |   |  | AIB BankGB & NI |  | CapitalMarkets |  | Poland |  | Group |   |  | Total
|                                            |  | (Euro in millions)   
|Operations by business segments             |  |                      
|Net interest income                         |  | 1,145                 |   |  | 447             |  | 396            |  | 180    |  | 10    |   |  | 2,178
|Other income                                |  | 361                   |   |  | 142             |  | 345            |  | 180    |  | 38    |   |  | 1,066
|                                            |  |                       |   |  |                 |  |                |  |        |  |       |   |  |      
|Total operating income                      |  | 1,506                 |   |  | 589             |  | 741            |  | 360    |  | 48    |   |  | 3,244
|Total operating expenses                    |  | 814                   |   |  | 303             |  | 403            |  | 245    |  | 103   |   |  | 1,868
|Provisions                                  |  | 44                    |   |  | 13              |  | 29             |  | 29     |  | 18    |   |  | 133  
|                                            |  |                       |   |  |                 |  |                |  |        |  |       |   |  |      
|Operating income/(loss)                     |  | 648                   |   |  | 273             |  | 309            |  | 86     |  | (73   | ) |  | 1,243
|Share of results of associated undertakings |  | (1                    | ) |  |                |  | 4              |  | 1      |  | 128   |   |  | 132  
|Income on disposal of property              |  | 7                     |   |  | 1               |  |               |  | 1      |  |      |   |  | 9    
|Income on disposal of businesses            |  |                      |   |  |                |  | 4              |  | 13     |  |      |   |  | 17   
|                                            |  |                       |   |  |                 |  |                |  |        |  |       |   |  |      
|Income before taxes                         |  | 654                   |   |  | 274             |  | 317            |  | 101    |  | 55    |   |  | 1,401
|                                            |  |                       |   |  |                 |  |                |  |        |  |       |   |  |      



37



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##### Table of Contents

Liquidity & capital resources

It is the Groups policy to maintain a strong capital base and to
utilize it efficiently in its development as a diversified international banking group. As part of the Groups capital management activities, the Group manages its mix of capital by currency in order to minimize the impact of exchange rate
fluctuations on the Groups key capital ratios. There are certain regulatory restrictions on the ability of subsidiaries to transfer funds to the parent company in the form of cash dividends, loans or advances. The impact of such restrictions
is not expected to have a material effect on the Groups ability to meet its cash obligations.

The following table shows AIB
Groups capital resources at December 31, and January 1, 2005:



|                                         |  |                    |  |               
|---------------------------------------- |  | ------------------ |  | --------------
|                                         |  | December 31,2005   |  | January 1,2005
|                                         |  | (Euro in millions)
|Stockholders equity(1)                  |  | 7,169              |  | 6,472         
|Equity and non-equity minority interests |  | 1,248              |  | 1,211         
|Preference shares                        |  | 210                |  | 182           
|Undated capital notes                    |  | 868                |  | 346           
|Dated capital notes                      |  | 2,678              |  | 1,923         
|                                         |  |                    |  |               
|                                         |  | 12,173             |  | 10,134        
|                                         |  |                    |  |               



|(1) | Includes other equity interests
|--- | -------------------------------

The increase arose primarily as a result of an increase in capital notes. In addition, shareholders equity increased arising from net retentions
and exchange rate movements offset by pension scheme actuarial losses.

The US dollar, sterling and Polish zloty strengthened by 15%, 3%
and 6% respectively relative to the euro, resulting in a positive foreign currency translation adjustment of 423 million. Shareholders equity benefited from net retentions of 773 million and the reissue of shares for staff
incentive schemes of 66 million. The actuarial losses in the Groups retirement benefit schemes, which the Group has recognized directly in shareholders equity under IAS 19  Employee benefits, amounted to 285 million.

There was a net increase of 1.3 billion in capital notes reflecting the issue of Stg£ 900 million and 500 million
offset by the redemption of 350 million and US$350 million in subordinated capital.

Capital ratios

In carrying out the Groups overall capital resources policy, a guiding factor is the supervisory requirements of the Irish Financial Services
Regulatory Authority (IFSRA), which applies a capital/risk assets ratio framework in measuring capital adequacy. This framework analyses a banks capital into three tiers. Tier 1 capital, comprizes mainly shareholders funds,
minority equity interests in subsidiaries and preference shares. It is the highest tier and can be used to meet trading and banking activity requirements. Tier 2 includes perpetual, medium-term and long-term subordinated debt, certain provisions for
impairment and fixed asset revaluation reserves. Tier 2 capital can be used to support both trading and banking activities. Tier 3 capital comprises short-term subordinated debt with a minimum original maturity of two years. The use of tier 3
capital is restricted to trading activities only and it is not eligible to support counterparty or settlement risk. The aggregate of tiers 2 and 3 capital included in the risk asset ratio calculation may not exceed tier 1 capital. AIB does not
currently use tier 3 capital in its capital calculation. The capital adequacy framework also applies risk weightings to balance sheet and off-balance sheet exposures, reflecting the credit and other risks associated with broad categories of
transactions and counterparties, to arrive at a figure for risk weighted assets. An internationally agreed minimum total capital (to risk weighted assets)ratio of 8% and a minimum tier 1 capital (to risk weighted assets)ratio of 4%
are the base standards from which the IFSRA sets individual capital ratios for credit institutions under its jurisdiction.

The EU Capital
Adequacy Directive (CAD) distinguishes the risks associated with a banks trading book from those in its banking book. Trading book risks are defined as those risks undertaken in order to benefit in the short-term from movements in market
prices such as interest rates, foreign exchange rates and equity prices. The remaining risks, relating to the normal retail and wholesale banking activities, are regarded as banking book risks.

The Capital Requirements Directive (CRD) amends the existing CAD for the prudential regulation of credit institutions and investment firms across the EU.
It is a major piece of legislation that introduces a modern prudential framework, relating capital levels more closely to risks.

The CRD
implements in the EU the revised Basel framework which is based on three Pillars:-

Pillar 1: minimum capital requirements for credit, market
and operational risks;

Pillar 2: supervisory review - establishing a constructive dialogue between a firm and the regulator on the risks, the risk
management and capital requirements of the firm; and

Pillar 3: market discipline - robust requirements on public disclosure intended to give the market a
stronger role in ensuring that firms hold an appropriate level of capital.

A project is in place across the Group to prepare for the
implementation of the CRD.



38



---

##### Table of Contents

The following table shows the components and calculation of the Groups tier 1 and total capital
ratios at December 31, 2005 and January 1, 2005.



|                                                         |  |                    |   |  |  |  |               |  
|-------------------------------------------------------- |  | ------------------ | - |  |  |  | ------------- | -
|                                                         |  | December 312005    |   |  |  |  | January 12005 |  
|                                                         |  | (Euro in millions) |  
|Tier 1                                                   |  |                    |   |  | 
|Paid-up ordinary share capital                           |  | 294                |   |  |  |  | 294           |  
|Eligible reserves                                        |  | 6,161              |   |  |  |  | 5,249         |  
|Equity and non-equity minority interests in subsidiaries |  | 1,248              |   |  |  |  | 1,211         |  
|Non-cumulative preference shares (note a)                |  | 210                |   |  |  |  | 182           |  
|Reserve capital instruments (note b)                     |  | 497                |   |  |  |  | 497           |  
|Supervisory deductions (note c)                          |  | (1,135             | ) |  |  |  | (923          | )
|                                                         |  |                    |   |  |  |  |               |  
|Total tier 1 capital                                     |  | 7,275              |   |  |  |  | 6,510         |  
|                                                         |  |                    |   |  |  |  |               |  
|                                                         |  |                    |  
|Tier 2                                                   |  |                    |   |  |  |  |               |  
|Fixed asset revaluation and other reserves               |  | 381                |   |  |  |  | 339           |  
|IBNR provisions                                          |  | 162                |   |  |  |  | 139           |  
|Subordinated perpetual loan capital                      |  | 868                |   |  |  |  | 272           |  
|Subordinated term loan capital                           |  | 2,678              |   |  |  |  | 1,562         |  
|                                                         |  |                    |   |  |  |  |               |  
|Total tier 2 capital                                     |  | 4,089              |   |  |  |  | 2,312         |  
|                                                         |  |                    |   |  |  |  |               |  
|Gross capital                                            |  | 11,364             |   |  |  |  | 8,822         |  
|Supervisory deductions (note d)                          |  | (487               | ) |  |  |  | (302          | )
|                                                         |  |                    |   |  |  |  |               |  
|Total capital                                            |  | 10,877             |   |  |  |  | 8,520         |  
|                                                         |  |                    |   |  |  |  |               |  

Notes:



|(a) | Non-cumulative preference shares are included within subordinated liabilities and other capital instruments in the consolidated balance sheet.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Reserve capital instruments are included within Other Equity Interests in the consolidated balance sheet.
|--- | ---------------------------------------------------------------------------------------------------------



|(c) | Supervisory deductions at the tier 1 capital level relate to intangible fixed assets and goodwill.
|--- | --------------------------------------------------------------------------------------------------



|(d) | Supervisory deductions at the total capital level relate to investments in non-consolidated financial entities, primarily the long-term assurance business attributable to
stockholders.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                  |  |                             |   |  |  |  |               |  
|--------------------------------- |  | --------------------------- | - |  |  |  | ------------- | -
|                                  |  | December 312005             |   |  |  |  | January 12005 |  
|                                  |  | (Euro in millions except %) |  
|Risk weighted assets              |  |                             |   |  | 
|Banking book:                     |  |                             |   |  |  |  |               |  
|On balance sheet                  |  | 79,520                      |   |  |  |  | 62,770        |  
|Off-balance sheet                 |  | 14,682                      |   |  |  |  | 10,960        |  
|                                  |  | 94,202                      |   |  |  |  | 73,730        |  
|                                  |  |                             |   |  |  |  |               |  
|Trading book:                     |  |                             |   |  |  |  |               |  
|Market risks                      |  | 6,891                       |   |  |  |  | 5,149         |  
|Counterparty and settlement risks |  | 563                         |   |  |  |  | 712           |  
|                                  |  |                             |   |  |  |  |               |  
|                                  |  | 7,454                       |   |  |  |  | 5,861         |  
|                                  |  |                             |   |  |  |  |               |  
|Total risk weighted assets        |  | 101,656                     |   |  |  |  | 79,591        |  
|                                  |  |                             |   |  |  |  |               |  
|Capital ratios                    |  |                             |   |  |  |  |               |  
|Tier 1 capital                    |  | 7.2                         | % |  |  |  | 8.2           | %
|Total capital                     |  | 10.7                        | % |  |  |  | 10.7          | %

The Group was strongly capitalized at December 31, 2005 with the tier 1 ratio 7.2% and the
total capital ratio at 10.7%. Risk weighted assets increased by 22 billion reflecting strong loan growth across the Group.

Tier 1
capital increased by 0.8 billion to 7.3 billion. This increase was as a result of the positive impact of net retentions and the positive impact of exchange rate movements offset by increased supervisory deductions.

Tier 2 capital increased by a net 1.8 billion, primarily as a result of subordinated debt issues totalling 1.8 billion and 0.2 billion
positive exchange translation adjustments offset by redemptions of 0.2 billion.

Supervisory deductions increased by
185 million, reflecting primarily an increase in the Groups interests in other financial investments.



39



---

##### Table of Contents

The table below provides details of the contractual cash obligations of the Group as at December 31,
2005.



|                                                |                    |                 |  |             |  |             |  |              |  |      
|----------------------------------------------- | ------------------ | --------------- |  | ----------- |  | ----------- |  | ------------ |  | -----
|                                                |                    | Less than1 year |  | 1 to3 years |  | 3 to5 years |  | After 5years |  | Total
|                                                | (Euro in millions)
|Contractual cash obligations                    |                    |                
|Long term debt                                  |                    |                |  |            |  |            |  | 2,678        |  | 2,678
|Capital expenditure commitments                 |                    | 105             |  | 83          |  |            |  |             |  | 188  
|Operating leases                                |                    | 18              |  | 55          |  | 75          |  | 513          |  | 661  
|Finance leases                                  |                    | 1               |  |            |  |            |  |             |  | 1    
|Other long term obligations (funding of Icarom) |                    | 11              |  | 22          |  | 23          |  | 22           |  | 78   
|                                                |                    |                 |  |             |  |             |  |              |  |      
|Total                                           |                    | 135             |  | 160         |  | 98          |  | 3,213        |  | 3,606
|                                                |                    |                 |  |             |  |             |  |              |  |      

The table above excludes deposits and other liabilities taken in the normal course of banking
business and short term and undated liabilities. The maturity of deposits by banks is given in Note 36, customer accounts in Note 37, trading portfolio financial liabilities in Note 38, and debt securities in issue in Note 39 of the Notes to
Consolidated Financial Statements.

In addition, AIB Group is party to contingent liabilities and commitments with nominal amounts of
28.1 billion at December 31, 2005 (see Note 48 Memorandum items: Contingent liabilities and commitments of the Notes to Consolidated Financial Statements).

Further discussion on liquidity is included in Item 11 Quantitative and qualitative disclosures about risk  Liquidity risk on page
67.

Off-balance sheet arrangements

AIB utilizes Special Purpose Entities (SPEs) in the ordinary course of business, primarily to provide liquidity and facilitate customer transactions.

Under IFRS, financial statements transactions and events should be accounted for and presented in accordance with their substance and economic reality and not merely their legal form.

As a result, the substance of transactions with an SPE forms the basis for the treatment in the Groups financial statements. An SPE is consolidated
in the financial statements when the substance of the relationship between the entity and the SPE indicates that the SPE is controlled by the entity and meets the criteria set out in IAS 27 Consolidated and separate financial statements
and SIC 12 Consolidation - Special purposes entities. The key areas where the Group uses SPEs are set out below.

Structuring of loans

The Group structures certain financing transactions, including funding the purchase or construction of certain assets, through
SPEs to ensure the availability of credit to customers in an efficient manner. These SPEs are consolidated in the financial statements and the exposures are included within loans to customers.

Asset management

The Group provides asset management
services to a large number of clients on an arms length basis and at market terms and prices. These assets are not consolidated in the Groups financial statements, as they are not assets of AIB or its subsidiaries.

AIB also manages third party assets through SPEs in which it has acquired interests. These SPEs, primarily Collateralized Debt Obligations
(CDOs), are not consolidated in the Groups financial statements.AIB does not have control over the SPEs nor does it bear the significant risks and rewards that are inherent in the assets. Accordingly, the Groups
interests are included within equity shares. A CDO is an investment vehicle which allows third party investors to make debt and/or equity investments in a vehicle containing a portfolio of loans and bonds with certain common features. The CDOs
invest in a range of senior secured loans, mezzanine loans and high yield bonds.

Employee compensation trusts

AIB and some of its subsidiary companies use trust structures to benefit employees and to facilitate the ownership of the Groups equity by
employees. The Group consolidates these trust structures where the risks and rewards of the underlying shares have not been transferred to the employees. Details of these structures are provided in Notes 46 and 55 of the Notes to Consolidated
Financial Statements.

Capital expenditure commitments

At December 31, 2005, the total estimated outstanding commitments for capital expenditure not provided for in the accounts amounted to 188 million (2004: 99 million). AIB Group believes that its
capital resources are adequate to meet such commitments. The general purpose of the capital commitments is buildings, predominantly the development of Bankcentre, and technology related expenditure.



40



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##### Table of Contents

Placings with banks

The following table analyzes placings with banks, based on the offices from which the placing is made.



|                                               |                    |              |      |      
|---------------------------------------------- | ------------------ | ------------ | ---- | -----
|                                               |                    | December 31,
|                                               | 2005               |              | 2004
|                                               | (Euro in millions)
|Placings with banks, repayable within 30 days: |                    |              |      |      
|Domestic offices                               |                    | 3,676        |      | 857  
|Foreign offices                                |                    | 2,478        |      | 883  
|                                               |                    |              |      |      
|                                               |                    | 6,154        |      | 1,740
|                                               |                    |              |      |      
|Placings with banks, repayable beyond 30 days: |                    |              |      |      
|Domestic offices                               |                    | 584          |      | 513  
|Foreign offices                                |                    | 391          |      | 287  
|                                               |                    |              |      |      
|                                               |                    | 975          |      | 800  
|                                               |                    |              |      |      
|Total                                          |                    | 7,129        |      | 2,540
|                                               |                    |              |      |      

AIB Group places funds with other banks for a number of reasons, including liquidity management,
the facilitation of international money transfers and the conduct of documentary credit business with correspondent banks.

Limits on the
aggregate amount of placings that may be made with individual institutions are established in accordance with AIB Group credit policy.

Deposits by
customers

The following table analyzes average deposits by customers based on the location of the offices in which the deposits are
recorded.



|                 |                    |              |      |       
|---------------- | ------------------ | ------------ | ---- | ------
|                 |                    | December 31,
|                 | 2005               |              | 2004
|                 | (Euro in millions)
|Domestic offices |                    |              |      |       
|Current accounts |                    | 11,274       |      | 9,547 
|Deposits:        |                    |              |      |       
|Demand           |                    | 5,764        |      | 5,384 
|Time             |                    | 15,701       |      | 13,001
|                 |                    |              |      |       
|                 |                    | 32,739       |      | 27,932
|                 |                    |              |      |       
|Foreign offices  |                    |              |      |       
|Current accounts |                    | 7,379        |      | 6,107 
|Deposits:        |                    |              |      |       
|Demand           |                    | 2,068        |      | 1,843 
|Time             |                    | 8,679        |      | 7,480 
|                 |                    |              |      |       
|                 |                    | 18,126       |      | 15,430
|                 |                    |              |      |       
|Total            |                    | 50,865       |      | 43,362
|                 |                    |              |      |       

Current accounts are primarily non-interest bearing checking accounts raised through AIB
Groups branch network in Ireland, Northern Ireland, Britain and Poland.

Demand deposits attract interest rates which vary from time
to time in line with movements in market rates and according to size criteria. Such accounts are not subject to withdrawal by check or similar instrument and have no fixed maturity dates.

Time deposits are generally larger, attract higher rates of interest than demand deposits and have predetermined maturity dates.

Customer deposits by currency

The following
table analyzes customer deposits by currency.



|                 |                    |              |      |       
|---------------- | ------------------ | ------------ | ---- | ------
|                 |                    | December 31,
|                 | 2005               |              | 2004
|                 | (Euro in millions)
|Euro             |                    | 38,140       |      | 30,299
|US dollar        |                    | 3,795        |      | 2,559 
|Sterling         |                    | 16,067       |      | 13,114
|Polish zloty     |                    | 4,463        |      | 4,015 
|Other currencies |                    | 115          |      | 164   
|                 |                    |              |      |       
|                 |                    | 62,580       |      | 50,151
|                 |                    |              |      |       



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##### Table of Contents

The following table shows details of the Groups large time deposits and certificates of deposit
(US$100,000 and over or the equivalent in other currencies) by time remaining until maturity.



|                        |                    |                   |                                   |       |                                    |       |                |      
|----------------------- | ------------------ | ----------------- | --------------------------------- | ----- | ---------------------------------- | ----- | -------------- | -----
|                        |                    | December 31, 2005
|                        | 3 monthsor less    |                   | After 3 monthsbut within 6 months |       | After 6 monthsbut within 12 months |       | After12 months
|                        | (Euro in millions)
|Large time deposits     |                    |                   |                                   |       |                                    |       |                |      
|Domestic offices        |                    | 11,431            |                                   | 576   |                                    | 365   |                | 237  
|Foreign offices         |                    | 5,768             |                                   | 218   |                                    | 166   |                | 164  
|Certificates of deposit |                    |                   |                                   |       |                                    |       |                |      
|Domestic offices        |                    | 2,280             |                                   | 492   |                                    | 222   |                |     
|Foreign offices         |                    | 2,782             |                                   | 725   |                                    | 1,949 |                | 1,578
|                        |                    |                   |                                   |       |                                    |       |                |      
|                        |                    | 22,261            |                                   | 2,011 |                                    | 2,702 |                | 1,979
|                        |                    |                   |                                   |       |                                    |       |                |      

Short-term borrowings

The following table shows details of short-term borrowings of AIB Group for the years ended December 31, 2005 and 2004.



|                             |                    |              |   |      |        |  
|---------------------------- | ------------------ | ------------ | - | ---- | ------ | -
|                             |                    | December 31, |  
|                             | 2005               |              |   | 2004 |       
|                             | (Euro in millions) |             
|Commercial paper:            |                    |              |   |      |        |  
|End of year outstandings     |                    | 718          |   |      | 1,187  |  
|Highest month-end balance    |                    | 1,779        |   |      | 1,396  |  
|Average balance              |                    | 1,304        |   |      | 239    |  
|Average rate of interest     |                    |              |   |      |        |  
|At end of year               |                    | 3.53         | % |      | 2.05   | %
|During the year              |                    | 3.24         | % |      | 1.95   | %
|Repurchase agreements:       |                    |              |   |      |        |  
|End of year outstandings     |                    | 11,044       |   |      | 8,600  |  
|Highest month-end balance    |                    | 13,046       |   |      | 10,599 |  
|Average balance              |                    | 10,686       |   |      | 8,390  |  
|Average rate of interest     |                    |              |   |      |        |  
|At end of year               |                    | 2.99         | % |      | 2.95   | %
|During year                  |                    | 2.26         | % |      | 2.33   | %
|Other short-term borrowings: |                    |              |   |      |        |  
|End of year outstandings     |                    | 31,372       |   |      | 20,224 |  
|Highest month-end balance    |                    | 34,470       |   |      | 27,372 |  
|Average balance              |                    | 25,061       |   |      | 21,975 |  
|Average rate of interest     |                    |              |   |      |        |  
|At end of year               |                    | 3.65         | % |      | 3.27   | %
|During year                  |                    | 3.61         | % |      | 2.96   | %

Average interest rates during the year are computed by dividing total interest expense by the
average amount borrowed. Average interest rates at the year end are average rates for a single day and as such may reflect one-day market distortions which may not be indicative of generally prevailing rates. Other short-term borrowings
consist principally of borrowings in the inter-bank market included within Deposits by banks in the Consolidated Financial Statements and generally have remaining maturities of one year or less. The maturity profiles of the above
outstandings are disclosed in notes 36, 37, 38 and 39 of the Consolidated Financial Statements.

Trend information

See Item 5  Operating results on pages 23 to 37.



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##### Table of Contents

|Item 6. | Directors, Senior Management & Employees
|------- | ----------------------------------------

Directors & senior management

Certain information in respect of the Directors and Executive Officers
is set out below. Directors are required to submit themselves for re-appointment at intervals of not more than three years, while Directors who have served for more than nine years are required to submit themselves for re-appointment annually.

Dermot GleesonBA, LLM

Chairman

Barrister, and member of the Adjunct Law Faculty of University College Dublin and a member of Cork University Foundation.
Member of the Royal Irish Academy and Chairman of the Irish Council for Bioethics. Director of the Gate Theatre. Former Attorney General of Ireland and former member of the Council of State. Former Chairman of the Review Body on Higher Remuneration
in the Public Sector. Joined the Board in 2000, and appointed Chairman in 2003. (Age 57)

Eugene Sheehy*MSc

Group Chief Executive

Joined AIB in
1971 and spent 20 years in retail banking, including branch manager appointments in a number of Dublin branches. Appointed General Manager, Retail Operations in 1999, and Managing Director, AIB Bank (RoI) in 2001. Appointed Chief Executive Officer
of AIBs USA Division and Executive Chairman-Designate of Allfirst Financial Inc. (Allfirst) in March 2002. Appointed Chairman and CEO, Mid Atlantic Division, M&T Bank (M&T), and to the Executive Management
Committee and Board of M&T in April 2003, following the merger of Allfirst and M&T. Appointed AIB Chief Executive-Designate in March 2005, co-opted to the Board on May 12, 2005, and assumed responsibility as Group Chief Executive with
effect from July 1, 2005. (Age 51)

Adrian BurkeB Comm, FCA

Audit Committee Chairman

Chairman of Coyle Hamilton Willis
Limited and of the Irish Credit Bureau Limited, and Director of Dairygold Co-Operative Society Limited. Vice Chairperson of the Institute of European Affairs. Former president of the Institute of Chartered Accountants in Ireland, former Managing
Partner of Arthur Andersen in Ireland, and former Chairman of the Joint Ethics Board of the Institutes of Chartered Accountants in Ireland, Scotland, and England and Wales. Joined the Board in 1997. (Age 64)

Kieran CrowleyBA, FCA

Consultant. Founder of
Crowley Services Dublin Ltd., which operates the Dyno-Rod franchise in Ireland. Director of Bank Zachodni WBK, AIBs Polish subsidiary. Member of IBEC National Executive Council and former Chairman of the Small Firms Association. Joined the
Board in August 2004. (Age 54)

Colm Doherty*B Comm

Managing Director, AIB Capital Markets plc. Director of M&T Bank Corporation, AIBs U.S. associate, and its subsidiary, Manufacturers and Traders Trust Company. Joined AIB International Financial Services in
1988, and became its Managing Director in 1991. Appointed Head of Investment Banking in 1994, and assumed his present position in 1999. Member of the International Financial Services Centre Clearing House Group. Joined the Board in 2003. (Age 47)

Padraic M FallonBBS, MA, FRSA

Chairman of Euromoney Institutional Investor PLC and Director of Daily Mail & General Trust p.l.c. in Britain. Member of the Board of Trinity College Dublin Foundation. Joined the Board in 1988. (Age 59)

Don GodsonBE, MIE, FIEI, C.Eng

Chairman of
Project Management Holdings Ltd. Board Member of the Michael Smurfit Graduate School of Business at University College Dublin. Former Director and Group Chief Executive of CRH p.l.c. Joined the Board in 1997. (Age 66)

John B McGuckianBSc Econ

Senior
Independent Non-Executive Director and Remuneration Committee Chairman

Chairman of Ulster Television p.l.c., Irish Continental Group p.l.c. and AIB
Group (UK) p.l.c., and a Director of a number of other companies in Ireland and the UK. Former Pro-Chancellor of The Queens University, Belfast, and former Chairman of The International Fund for Ireland and of the Industrial Development Board
for Northern Ireland. Joined the Board in 1977 and appointed Senior Independent Non-Executive Director in 2003. (Age 66)

John ODonnell *FCMA, FCCA

Group Finance Director

Joined AIB in 1989 as Associate Director, AIB International Financial Services, becoming Managing Director in 1995. Appointed Managing Director, AIB Corporate Finance in 1996, Head of Investment Banking, AIB Capital
Markets in 2001, and Group Finance Director-Designate in July 2005. Co-opted to the Board on January 11, 2006 (Age 51)



43



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##### Table of Contents

Jim OLearyMA MSI

Lecturer in economics at the National University of Ireland, Maynooth. Former Chief Economist at Davy Stockbrokers, and former Director of Aer Lingus, the National Statistics Board and Gresham Hotel Group. Joined the
Board in 2001. (Age 49)

Michael J SullivanJD

Served as US Ambassador to Ireland from January 1999 to June 2001 and as Governor of the State of Wyoming, USA, between 1987 and 1995. Director of Kerry Group p.l.c., Sletten Construction Inc., Cimarex Energy, Inc.,
First Interstate BancSystem, Inc., and a Trustee of the Catholic Diocese of Wyoming. Member of the Bar, State of Wyoming. Joined the Board in 2001. (Age 66)

Robert G Wilmers

Chairman and former President and Chief Executive Officer of M&T Bank Corporation (M&T),
Buffalo, New York State. Director The Business Council of New York State, Inc., the Buffalo Niagara Partnership, and the Andy Warhol Foundation. Served as Chairman of the New York State BankersAssociation in 2002, and as a Director of the
Federal Reserve Bank of New York from 1993 to 1998. Joined the Board in April 2003, as the designee of M&T on the acquisition by AIB of a strategic stake in M&T. (Age 71)

Jennifer WinterBSc

Corporate
Social Responsibility Committee Chairman

Chief Executive, the Barretstown Gang Camp Limited and Director of Project Management Holdings Ltd. Former
Vice President GlaxoSmithKline Pharmaceuticals Limited UK and former Managing Director of SmithKline Beecham, Ireland. Joined the Board in August 2004. (Age 46)



|* | Executive Directors
|- | -------------------

Board Committees

Information concerning membership of the Boards Audit, Nomination & Corporate Governance, Remuneration, and Corporate Social Responsibility Committees is
given in the Corporate Governance statement on pages 51 to 55.



|                         |  |                          |  |                                            
|------------------------ |  | ------------------------ |  | -------------------------------------------
|Other Executive Officers |  |                          |  |                                            
|Name                     |  | Principal occupation     |  | Year in which appointed to present position
|Shom Bhattacharya (55)   |  | Group Chief Risk Officer |  | 2002                                       
|                         |  |                         
|Gerry Byrne (50)         |  | Managing Director,       |  |                                            
|                         |  | AIB Poland Division      |  | 2001                                       
|                         |  |                         
|Donal Forde (45)         |  | Managing Director,       |  |                                            
|                         |  | AIB Bank ROI             |  | 2002                                       
|                         |  |                         
|Robbie Henneberry (42)   |  | Managing Director,       |  |                                            
|                         |  | AIB Group (UK) p.l.c.    |  | 2005                                       
|                         |  |                         
|Steven Meadows (52)      |  | Group Director,          |  |                                            
|                         |  | Operations & Technology  |  | 2005                                       
|                         |  |                         
|Mary Toomey (57)         |  | Head of Group Strategic  |  |                                            
|                         |  | Human Resources          |  | 2005                                       

Compensation

Aggregate remuneration of Directors and Officers

The aggregate remuneration for the year ended December 31, 2005 of all Directors and Executive Officers as a group amounted to 18.665 million;
the corresponding figure for the year ended December 31, 2004 was 9.205 million. These sums include amounts paid under the Groups Employees Profit Sharing Plans, together with pension and other remuneration paid to former
Directors (2005: 0.758 million; 2004: 0.842 million).

Included above is an aggregate amount set aside by AIB, in the years
ended December 31, 2005 and 2004, to provide pension benefits for Directors and Executive Officers of AIB which amounted to 5.496 million and 1.027 million respectively.

Remuneration policy

The Companys policy in respect of the remuneration of the executive directors aims
to support and enhance business performance, and to underpin and reinforce a high-performance and ethical culture. Remuneration packages and structures are such as to attract, retain, motivate and reward the executives concerned and, by ensuring
strong links between performance and reward, align individual and company success. In considering such packages, cognisance is taken of: the levels of remuneration for comparable positions, as advised by external consultants (Kepler Associates, who
have not been engaged to provide any other services to the Group); the responsibilities and complexity of the roles of the individuals concerned; their individual performances measured against specific and challenging objectives; and the
Groups overall performance. A high proportion of the remuneration of the senior executives will be delivered through variable pay, including equity. Senior executives participating in the AIB Group Performance Share Plan 2005 (note 13) are
expected to build up, over time, ownership of the Companys shares to the equivalent of annual basic salary.



44



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##### Table of Contents

Remuneration



|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|------------------------------------------ |  | ------------------- |  | ------ |  | -------- |  | -------------- |  | ------------------ |  | ----------------------- |  | -----
|                                           |  | December 31, 2005  
|                                           |  | Fees(1)             |  | Salary |  | Bonus(2) |  | Profitshare(3) |  | Taxablebenefits(4) |  | Pensioncontributions(5) |  | Total
|                                           |  | (Euro in thousands)
|Executive directors                        |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Michael Buckley (retired June 30, 2005)    |  | 17                  |  | 430    |  | 400      |  | 13             |  | 66                 |  | 533                     |  | 1,459
|Colm Doherty                               |  |                    |  | 471    |  | 900      |  | 13             |  | 45                 |  | 122                     |  | 1,551
|Gary Kennedy                               |  |                    |  | 470    |  | 265      |  | 13             |  | 53                 |  | 2,133                   |  | 2,934
|Aidan McKeon                               |  | 35                  |  | 403    |  | 256      |  | 4              |  | 34                 |  | 180                     |  | 912  
|Eugene Sheehy (appointed May 12, 2005)     |  |                    |  | 510    |  | 426      |  |               |  | 36                 |  | 132                     |  | 1,104
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|                                           |  | 52                  |  | 2,284  |  | 2,247    |  | 43             |  | 234                |  | 3,100                   |  | 7,960
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Non-executive directors                    |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Adrian Burke                               |  | 127                 |  |        |  |          |  |                |  |                    |  |                        |  | 127  
|Kieran Crowley                             |  | 85                  |  |        |  |          |  |                |  |                    |  |                        |  | 85   
|Padraic M Fallon                           |  | 44                  |  |        |  |          |  |                |  |                    |  | 11                      |  | 55   
|Dermot Gleeson                             |  | 375                 |  |        |  |          |  |                |  |                    |  |                        |  | 375  
|Don Godson                                 |  | 95                  |  |        |  |          |  |                |  |                    |  |                        |  | 95   
|Sir Derek Higgs (resigned October 5, 2005) |  | 75                  |  |        |  |          |  |                |  |                    |  |                        |  | 75   
|John B McGuckian                           |  | 141                 |  |        |  |          |  |                |  |                    |  | 11                      |  | 152  
|Jim OLeary                                |  | 97                  |  |        |  |          |  |                |  |                    |  |                        |  | 97   
|Michael J Sullivan                         |  | 98                  |  |        |  |          |  |                |  |                    |  |                        |  | 98   
|Robert G.Wilmers(1)                        |  |                    |  |        |  |          |  |                |  |                    |  |                        |  |     
|Jennifer Winter                            |  | 58                  |  |        |  |          |  |                |  |                    |  |                        |  | 58   
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|                                           |  | 1,195               |  |        |  |          |  |                |  |                    |  | 22                      |  | 1,217
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Former directors                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Pensions(6)                                |  |                     |  |        |  |          |  |                |  |                    |  |                         |  | 758  
|Other payments(7)                          |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |     
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  | 758  
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Total                                      |  |                     |  |        |  |          |  |                |  |                    |  |                         |  | 9,935
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|                                           | 
|                                           |  | December 31, 2004  
|                                           |  | Fees(1)             |  | Salary |  | Bonus(2) |  | Profitshare(3) |  | Taxablebenefits(4) |  | Pensioncontributions(5) |  | Total
|                                           |  | (Euro in thousands)
|Executive directors                        |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Michael Buckley                            |  | 35                  |  | 775    |  | 360      |  | 13             |  | 52                 |  | 210                     |  | 1,445
|Colm Doherty                               |  | 35                  |  | 418    |  | 340      |  | 13             |  | 43                 |  | 109                     |  | 958  
|Gary Kennedy                               |  | 35                  |  | 415    |  | 235      |  | 13             |  | 38                 |  | 108                     |  | 844  
|Aidan McKeon                               |  | 35                  |  | 356    |  | 242      |  | 4              |  | 38                 |  | 159                     |  | 834  
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|                                           |  | 140                 |  | 1,964  |  | 1,177    |  | 43             |  | 171                |  | 586                     |  | 4,081
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Non-executive directors                    |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Adrian Burke                               |  | 146                 |  |        |  |          |  |                |  |                    |  |                        |  | 146  
|Kieran Crowley                             |  | 18                  |  |        |  |          |  |                |  |                    |  |                        |  | 18   
|Padraic M Fallon                           |  | 44                  |  |        |  |          |  |                |  |                    |  | 11                      |  | 55   
|Dermot Gleeson                             |  | 285                 |  |        |  |          |  |                |  |                    |  |                        |  | 285  
|Don Godson                                 |  | 62                  |  |        |  |          |  |                |  |                    |  |                        |  | 62   
|Sir Derek Higgs                            |  | 71                  |  |        |  |          |  |                |  |                    |  |                        |  | 71   
|John B McGuckian                           |  | 103                 |  |        |  |          |  |                |  |                    |  | 11                      |  | 114  
|Carol Moffett                              |  | 33                  |  |        |  |          |  |                |  |                    |  |                        |  | 33   
|Jim OLeary                                |  | 68                  |  |        |  |          |  |                |  |                    |  |                        |  | 68   
|Michael J Sullivan                         |  | 95                  |  |        |  |          |  |                |  |                    |  |                        |  | 95   
|Robert G.Wilmers(1)                        |  |                    |  |        |  |          |  |                |  |                    |  |                        |  |     
|Jennifer Winter                            |  | 39                  |  |        |  |          |  |                |  |                    |  |                        |  | 39   
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|                                           |  | 964                 |  |        |  |          |  |                |  |                    |  | 22                      |  | 986  
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Former directors                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Pensions(6)                                |  |                     |  |        |  |          |  |                |  |                    |  |                         |  | 758  
|Other payments(7)                          |  |                     |  |        |  |          |  |                |  |                    |  |                         |  | 84   
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  | 842  
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      
|Total                                      |  |                     |  |        |  |          |  |                |  |                    |  |                         |  | 5,909
|                                           |  |                     |  |        |  |          |  |                |  |                    |  |                         |  |      



45



---

##### Table of Contents

|(1) | Fees comprise a basic fee of 35,000 per annum paid in respect of service as a director,
and additional remuneration paid to any non-executive director who holds the office of Chairman, Chairman of the Audit Committee or of the Remuneration Committee, or Senior Independent Director, or who performs additional services, such as through
membership of Board Committees, or who serves on the board of a subsidiary company.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2005, the Board decided that the
practice of paying Directors Fees to Executive Directors should be discontinued, and that the salaries of those concerned should be adjusted accordingly, on an actuarially neutral basis. This adjustment was applied with effect from
January 1, 2005, save in the case of Mr. Michael Buckley (who retired on June 30, 2005) and Mr.Aidan McKeon (who retired from the Board on December 31, 2005).

A fee of 35,000 was paid to M&T Bank Corporation (M&T) in the year ended December 31, 2005 (2004: 35,000), in respect
of Mr. Robert G.Wilmerss directorship of the Company as the designee of M&T, pursuant to the Agreement and Plan of Reorganisation, dated September 26, 2002, by and among the Company, Allfirst Financial Inc. and M&T, as
approved by shareholders at the Extraordinary General Meeting held on December 18, 2002 (the Agreement).

Messrs. Michael
Buckley, Eugene Sheehy, Gary Kennedy (until September 2005) and Colm Doherty (from September 2005) served as AIB-designated Directors of M&T, pursuant to the Agreement. The fees payable in this regard, which amounted to 55,323 in 2005
(2004: 56,718), were paid to AIB, except that the portion of this figure payable in respect of Mr. Buckley from the date of his retirement as Group Chief Executive and Director of AIB on June 30, 2005 (10,656) was paid direct
to Mr. Buckley, who continues to serve as an AIB-designated Director of M&T.

Each executive director is permitted to hold no more
than one directorship of another public company, subject to the approval of the Nomination and Corporate Governance Committee, and any related remuneration may be retained by the individual concerned. Mr. Gary Kennedy joined the board of Elan
Corporation p.l.c., on May 26, 2005; the related remuneration amounted to 30,794 in 2005.



|(2) | The executive directors participate in a discretionary, performance-related, incentive scheme
for senior executives under which bonuses may be earned on the achievement of specific, performance-related objectives, reviewed annually. The bonus may range from 0% to 100% of annual salary; the upper limit may be exceeded at the discretion of the
Remuneration Committee.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Information on the employees profit sharing schemes, which are operated on terms
approved by the shareholders, is given in note 13 in the consolidated financial statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Taxable benefits include the use of a company car or the payment of a car allowance, and
benefit arising from loans made at preferential interest rates.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Pension contributions represent:
|--- | ----------------------------------



| | (a) | payments to defined benefit pension schemes, in accordance with actuarial advice, to provide post-retirement pensions from normal retirement date. The contribution rates, as a
percentage of pensionable emoluments, are 26.0% in respect of the Republic of Ireland pension scheme (2004: 26.0%) and 44.6% in respect of the UK pension scheme (2004: 44.6%). The fees of the non-executive directors who joined the Board since 1990
are not pensionable; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | in respect of 2005, one-off payments to the pension scheme to meet the schemes liabilities arising from the retirements of
| | --- | ---------------------------------------------------------------------------------------------------------------------------



| | (i) | Mr. Michael Buckley, some seven months prior to his normal retirement date (funding impact: 0.416million), and
| | --- | ---------------------------------------------------------------------------------------------------------------



| | (ii) | Mr. Gary Kennedy (funding impact: 2.011million).
| | ---- | -------------------------------------------------

The pension
benefits earned during the year, and accrued at year-end (or date of retirement, if earlier), are as follows:



|                        |  |                                          |  |                              |  |                  
|----------------------- |  | ---------------------------------------- |  | ---------------------------- |  | -----------------
|                        |  | Increase inaccruedbenefits during2005(a) |  | Accruedbenefit atyear-end(b) |  | Transfervalues(c)
|                        |  | (Euro in thousands)                     
|Executive directors     |  |                                          |  |                              |  |                  
|Michael Buckley         |  | 68                                       |  | 590                          |  | 1,798            
|Colm Doherty            |  | 27                                       |  | 188                          |  | 307              
|Gary Kennedy            |  | 94                                       |  | 200                          |  | 3,614            
|Aidan McKeon            |  | 34                                       |  | 270                          |  | 631              
|Eugene Sheehy           |  | 257                                      |  | 410                          |  | 3,635            
|Non-executive directors |  |                                          |  |                              |  |                  
|Padraic M Fallon        |  | 0.5                                      |  | 16                           |  | 6                
|John B McGuckian        |  | 0.2                                      |  | 23                           |  | 4                



|(a) | Increases are after adjustment for inflation, and arise in consequence of (i) additional
pensionable service; (ii) increases in pensionable earnings; and (iii) adjustments, if any, agreed in respect of the individuals pension payable. The increase in accrued pension benefits in respect of Mr. Sheehy reflects
primarily the increase in salary that was granted to him on his appointment as Group Chief Executive during the year.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Figures represent the accumulated total amounts of accrued benefits (i.e. annual pension)
payable at normal retirement dates, as at December 31, 2005, and at actual retirement date in respect of Mr. Buckley (June 30, 2005).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



46



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##### Table of Contents

| | (c) | Figures show the transfer values of the increases in accrued benefits during 2005. These transfer values do not represent sums paid or due, but the amounts that the Companys
pension scheme would transfer to another pension scheme, in relation to the benefits accrued in 2005, in the event of the member leaving service.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Pensions (758,000) represents the payment of pensions to former directors or their dependants granted on an ex-gratia basis and fully provided for
in the balance sheet, together with an amount of 650,000 to amortize a deficit in the Non-Executive Directors Pension Scheme, in accordance with actuarial advice (2004: 758,000, inclusive of 650,000 in respect of amortization
of the Pension Scheme deficit).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Other payments in 2004 (83,507) represented a final payment to Mr. Jeremiah E. Casey under the terms of a post-retirement consultancy
contract approved by shareholders at the 1999 Annual General Meeting.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Board practices

Directors

The following board changes occurred with effect from the dates shown:



| |  | Mr. Eugene Sheehy was appointed an Executive Director on May 12, 2005;
|- |  | ----------------------------------------------------------------------



| |  | Mr. Michael Buckley retired as an Executive Director on June 30, 2005;
|- |  | ----------------------------------------------------------------------



| |  | Sir Derek Higgs resigned as a Non-Executive Director on October 5, 2005;
|- |  | ------------------------------------------------------------------------



| |  | Mr. Gary Kennedy resigned as an Executive Director on December 31, 2005;
|- |  | ------------------------------------------------------------------------



| |  | Mr.Aidan McKeon retired as an Executive Director on December 31, 2005;
|- |  | ----------------------------------------------------------------------



| |  | Mr. John ODonnell was appointed an Executive Director on January 11, 2006.
|- |  | ---------------------------------------------------------------------------

All Directors will retire at the 2006 AGM and, being eligible, offer themselves for re-appointment.

Audit committee

See Corporate Governance Statement on page 53.

Corporate social responsibility committee

See Corporate Governance Statement on page 53.

Nomination and corporate governance committee

See Corporate Governance Statement on page 53.

Remuneration committee

See Corporate Governance Statement on page 54.

Service Contracts

There are no service contracts in force for any director with the Company or any
of its subsidiaries.



47



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##### Table of Contents

Share ownership

Interests in shares and options

The beneficial interests of the directors and the secretary in office at December 31, 2005, and of their spouses and minor children, are as follows:



|                   |  |                          |  |                
|------------------ |  | ------------------------ |  | ---------------
|                   |  | Ordinary shares of 0.32
|                   |  | December 31,2005         |  | January 1,2005*
|Ordinary shares    |  |                          |  |                
|Directors:         |  |                          |  |                
|Adrian Burke       |  | 11,004                   |  | 11,004         
|Kieran Crowley     |  | 7,520                    |  | 5,020          
|Colm Doherty       |  | 70,469                   |  | 57,218         
|Padraic M Fallon   |  | 8,979                    |  | 8,979          
|Dermot Gleeson     |  | 32,826                   |  | 22,826         
|Don Godson         |  | 50,000                   |  | 38,599         
|Gary Kennedy       |  | 101,875                  |  | 101,124        
|John B McGuckian   |  | 72,911                   |  | 72,911         
|Aidan McKeon       |  | 28,246                   |  | 27,853         
|Jim OLeary        |  | 4,000                    |  | 4,000          
|Eugene Sheehy      |  | 71,284                   |  | 71,284         
|Michael J Sullivan |  | 1,700                    |  | 1,700          
|Robert G Wilmers   |  | 152,459                  |  | 52,459         
|Jennifer Winter    |  | 280                      |  |               
|Secretary:         |  |                          |  |                
|W M Kinsella       |  | 40,050                   |  | 39,489         



|* | or later date of appointment
|- | ----------------------------

The following table
sets forth information, at December 31, 2005, with respect to the percentage of Ordinary shares owned by Directors and Executive Officers of AIB as a group:



|                |  |                                                    |  |             |  |                 |  
|--------------- |  | -------------------------------------------------- |  | ----------- |  | --------------- | -
|Title of class  |  | Identity of person or group                        |  | Numberowned |  | Percentof class |  
|Ordinary shares |  | Directors and Executive Officers of AIB as a group |  | 664,926     |  | 0.07            | %

Details of the Executive Directors and the Secretarys share options are given below.
Information on the Share Option Schemes, including policy on the granting of options, is given in note 13 in the consolidated financial statements. The vesting of these options in the individuals concerned is dependent on Earnings Per Share
(EPS) targets being met. Subject thereto, the options outstanding at December 31, 2005 are exercisable at various dates between 2006 and 2015. Details are shown in the Register of Directors and Secretarys Interests,
which may be inspected by shareholders at the Companys Registered Office.



|              |  |                  |  |                 |  |                        |  |                          |  |                               |  |                                                                              |  |      
|------------- |  | ---------------- |  | --------------- |  | ---------------------- |  | ------------------------ |  | ----------------------------- |  | ---------------------------------------------------------------------------- |  | -----
|              |  | December 31,2005 |  | January 1,2005* |  | Since January 1, 2005* |  | Price ofoptionsexercised |  | Marketprice atdate ofexercise |  | Weighted averagesubscription price ofoptions
outstandingat December 31, 2005
|              |  |                  |  | Granted         |  | Exercised              |  |                          | 
|              |  |                  |  |                 |  |                        |  |                          |  |                              |  |                                                                             |  |     
|Directors:    |  |                  |  |                 |  |                        |  |                          |  |                               |  |                                                                              |  |      
|Colm Doherty  |  | 185,000          |  | 230,000         |  | 5,000                  |  | 50,000                   |  | 10.02                         |  | 18.14                                                                        |  | 12.83
|Gary Kennedy  |  | 180,000          |  | 165,000         |  | 30,000                 |  | 15,000                   |  | 10.02                         |  | 18.14                                                                        |  | 13.59
|Aidan McKeon  |  | 137,000          |  | 137,000         |  |                       |  |                         |  |                              |  |                                                                             |  | 12.94
|Eugene Sheehy |  | 154,000          |  | 154,000         |  |                       |  |                         |  |                              |  |                                                                             |  | 13.08
|Secretary:    |  |                  |  |                 |  |                        |  |                          |  |                               |  |                                                                              |  |      
|W M Kinsella  |  | 40,500           |  | 40,500          |  | 15,000                 |  | 15,000                   |  | 10.02                         |  | 17.63                                                                        |  | 13.99



|* | or later date of appointment
|- | ----------------------------



48



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##### Table of Contents

Non-executive directors do not participate in the share options schemes (or plans). The
aggregate number of share options outstanding at December 31, 2005 in the names of executive directors and officers, as a group, was 1,326,000, as follows:



|                                            |  |          
|------------------------------------------- |  | ---------
|Outstanding as at December 31, 2004:        |  | 1,262,000
|Options granted, 2005                       |  | 170,000  
|Less: Options exercised, 2005               |  | 106,000  
|Less: Options lapsed, 2005                  |  |         
|                                            |  |          
|Options outstanding as at December 31, 2005 |  | 1,326,000
|                                            |  |          

Long Term Incentive Plans

Details of the Executive Directors and the Secretarys conditional grants of awards of shares are given below. These conditional awards are subject to onerous performance targets being met, in terms of
total shareholder return and EPS growth. Information on the Long Term Incentive Plans, including policy on the granting of awards, is given in note 13 in the consolidated financial statements. The conditional grants of awards outstanding at
December 31, 2005 may vest between 2006 and 2008, depending on the date of the grant.

The following conditional grants of awards of ordinary shares
have been made to the Executive Directors and the Secretary under the terms of the Plan:



|              |  |                              |  |                    |  |                            
|------------- |  | ---------------------------- |  | ------------------ |  | ---------------------------
|              |  | Total as atDecember 31, 2005 |  | Granted during2005 |  | Total as atJanuary 1, 2005*
|Directors:    |  |                              |  |                    |  |                            
|Colm Doherty  |  | 73,715                       |  | 38,715             |  | 35,000                     
|Gary Kennedy  |  | 20,000                       |  |                   |  | 20,000                     
|Aidan McKeon  |  | 14,000                       |  |                   |  | 14,000                     
|Eugene Sheehy |  | 105,650                      |  | 90,650             |  | 15,000                     
|Secretary:    |  |                              |  |                    |  |                            
|W M Kinsella  |  | 4,500                        |  |                   |  | 4,500                      



|* | or later date of appointment
|- | ----------------------------

Apart from the
interests set out above, the Directors and Secretary in office at year-end, and their spouses and minor children, have no interests in the shares of the Company. Mr. John ODonnell, who was co-opted to the Board on January 11, 2006,
has interests (inclusive of the interests of his wife and minor children) in 8,844 ordinary shares of the Company; he has options over 96,000 shares, and conditional grants of awards of 73,737 shares (42,340 on his appointment under the Long Term
Incentive Plans, and 31,397 awarded under the Performance Share Plan 2005 on March 21, 2006).

The year-end closing price, on the Irish Stock
Exchange, of the Companys ordinary shares was 18.05 per share; during the year the price ranged from 15.20 to 18.64 per share.

The
following changes in the above interests occurred between December 31, 2005 and May 17, 2006.

Directors



|(a) | Mr. Colm Doherty was awarded a conditional grant of award of 37,676 shares under the Performance Share Plan 2005 on March 21, 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------



|(b) | Mr. Dermot Gleeson purchased 5,000 shares on March 13, 2006 and purchased a further 10,000 shares on May 16, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------



|(c) | Mr. Eugene Sheehy was awarded a conditional grant of award of 83,725 shares under the Performance Share Plan 2005 on March 21, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------



|(d) | Mr. Eugene Sheehy purchased 34,000 shares on exercise of share options on May 16, 2006.
|--- | ---------------------------------------------------------------------------------------

Secretary

Mr.W M Kinsella was awarded a conditional grant of award of 5,814 shares under the Performance Share Plan
2005 on March 21, 2006.



Employee share plans

The Company operates an AIB Approved Employees Profit Sharing Scheme 1998 on terms approved by the shareholders. There are no vesting
conditions. All employees, including executive directors of the Company and certain subsidiaries are eligible to participate, subject to minimum service periods (i.e. a continuous employment for at least one year prior to the last day of the
relevant accounting period). The directors at their discretion may set aside each year a sum not exceeding 5% of eligible profits of participating companies.

Eligible employees in the Republic of Ireland may elect to receive their profit sharing allocations either in shares or in cash. Such shares are held by Trustees for a minimum period of two years and are required to
be held for a total period of three years for the employees to obtain the maximum tax benefit. Such employees may also elect to forego an amount of salary, subject to



49



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##### Table of Contents

certain limitations, towards the acquisition of additional shares. The maximum market value of shares that may be appropriated to any employee in a year may
not exceed 12,700.

In December 2002 a Share Ownership Plan was launched in the UK to replace the profit sharing scheme that
previously operated for UK-based employees. The Plan, which was approved by shareholders at the 2002 Annual General Meeting, provides for the receipt by eligible employees of shares in a number of categories: Partnership Shares, in which employees
may invest up to Stg £ 1,500 per annum from salary; Free Shares, involving the award by the Company of shares up to the value of Stg £3,000 per annum per employee; and Dividend Shares, which may be acquired by employees by
re-investing dividends of up to Stg £1,500 per annum.

To participate in the plan, eligible employees must have been in the
continuous employment of the Group from July 1, prior to the grant date. During 2005, a total of 274,251 shares with a value of  4.3million (2004: 342,674 shares with a value of  3.6million) were awarded under the Free
Share scheme. Shares are forfeited on a sliding scale should the employee leave the service of the Group within three years of grant date. The market value is determined as the mid market price of the Companys shares on the Irish Stock
Exchange daily official list on the relevant date.

The company operates a Save As You Earn Share Option Scheme in the UK. The scheme is
open to all employees of AIB Group in the UK who have completed six months continuous service at the date of grant. Under the Scheme employees may opt to save fixed amounts on a regular basis, over a three-year period, subject to a maximum monthly
saving of Stg £ 250 per employee. At the end of the three-year period, a tax-free bonus equal to 1.7 times the participants monthly contribution is added. In addition, at the end of the three-year period the participant has 6 months
in which to exercise the option and purchase the shares at the option price (fixed price being the average price per AIB share, on the London Stock Exchange on the day prior to grant date, less 20% discount); or the participant may withdraw the
savings and bonus amount.

During 2005, the Company re-issued from its pool of Treasury Shares 1,835,842 ordinary shares to the Trustees of
the employees profit sharing schemes, at 15.78 per share. The consideration received for these shares was 29 million.

Share option
plan

With the introduction of the AIB Group Performance Share Plan 2005 (see note 13 in the notes to the accounts), the share
option plan has been discontinued to the extent that further grants of options over the Companys shares may not be made, except in exceptional circumstances. Options were granted at the market price, being the middle market quotation of the
Banks shares on the Irish Stock Exchange on the day preceding the date on which the option is granted. The exercise of options granted between January 1, 1996 and December 31, 2000 is conditional on the achievement of earnings per
share (EPS) growth of at least 2% per annum, compound, above the increase in the Consumer Price Index (CPI) over a period of not less than three and not more than five years from date of grant. The exercise of options
granted since January 1, 2001 is conditional on the achievement of EPS growth of at least 5% per annum, compound, above the increase in the CPI over a period of not less than three and not more than five years from date of grant. Options
may not be transferred or assigned and may be settled through the issue/re-issue of shares. They may be exercised only between the third and seventh anniversaries of their grant in the case of the options granted up to December 31, 2000, and
between the third and tenth anniversaries of their grant in the case of options granted subsequent to that date.

The shares issued during
2005 to participants in the schemes were issued at prices of 11.90, 12.20 and 10.02 per share. The consideration received for these shares was 37 million.

At December 31, 2005, options were held by some 3,621 participants over 18,627,779 ordinary shares in aggregate (2.0% of the issued ordinary share
capital, 2.1% net of 43,539,597 Treasury Shares held at that date), at prices ranging from 10.02 to 18.63 per share; these options may be exercised at various dates up to December 6, 2015.



|                   |  |                                
|------------------ |  | -------------------------------
|Subscription price |  | Exercise period                
|                   | 
|11.90/12.20      |  | April 2001 - April 2005        
|                   | 
|10.02             |  | May 2003 - May 2007            
|                   | 
|11.98             |  | April 2004 - April 2011        
|                   | 
|12.40             |  | September 2004 - September 2011
|                   | 
|13.55             |  | June 2005 - June 2012          
|                   | 
|13.90             |  | December 2005 - December 2012  
|                   | 
|13.30             |  | April 2006 - April 2013        
|                   | 
|12.60             |  | April 2007 - April 2014        
|                   | 
|16.20             |  | April 2008 - April 2015        
|                   | 
|18.63             |  | December 2008 - December 2015  



50



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##### Table of Contents

The following is a summary of the changes in outstanding options under the AIB Executive Group
Performance Share Plan for the years ended December 31, 2005 and 2004.



|                                               |  |                          |   |  |            |  
|---------------------------------------------- |  | ------------------------ | - |  | ---------- | -
|                                               |  | Years ended december 31, |  
|                                               |  | 2005                     |   |  | 2004       |  
|Shares subject to options at January 1         |  | 21,025,229               |   |  | 28,553,079 |  
|Options exercised at 5.80                     |  |                         |   |  | (501,500   | )
|Options exercised at 6.25                     |  |                         |   |  | (50,000    | )
|Options exercised at 7.61                     |  |                         |   |  |           |  
|Options exercised at 10.02                    |  | (2,510,950               | ) |  | (2,281,850 | )
|Options exercised at 11.90                    |  | (897,000                 | ) |  | (1,505,000 | )
|Options exercised at 12.20                    |  | (80,000                  | ) |  |           |  
|Options granted                                |  | 1,459,000                |   |  | 3,223,500  |  
|Options granted in 1999 which did not vest     |  |                         |   |  | (6,301,500 | )
|Options lapsed, in respect of former employees |  | (368,500                 | ) |  | (111,500   | )
|                                               |  |                          |   |  |            |  
|Shares subject to options at December 31       |  | 18,627,779               |   |  | 21,025,229 |  
|                                               |  |                          |   |  |            |  

Limitations on profit-sharing and share option plans

Under the terms of the employees profit sharing plans, the aggregate number of shares that may be purchased/held by the Trustees in any ten-year
period may not exceed 10% of the issued ordinary share capital. The aggregate number of shares issued under the share option plans in any ten-year period may not exceed 5% of the issued ordinary share capital for the time being, provided, however,
that in any year the maximum number of shares made available shall not exceed 0.5% of such share capital. The company complies with guidelines issued by the Irish Association of Investment Managers in relation to these plans.

Corporate governance

Corporate governance is concerned with how companies are managed and controlled. The
Board is committed to the highest standards in that regard. This statement explains how the Company has applied the Principles set out in the Combined Code on Corporate Governance(1)(the Code).

The Board

Role

The Board is responsible for the leadership,
direction and control of the Company and the Group and is accountable to shareholders for financial performance. There is a comprehensive range of matters specifically reserved for decision by the Board; at a high level this includes:



| |  | determining the Companys strategic objectives and policies;
|- |  | ------------------------------------------------------------



| |  | appointing the Chairman and the Group Chief Executive and addressing succession planning;
|- |  | -----------------------------------------------------------------------------------------



| |  | monitoring progress towards achievement of the Companys objectives and compliance with its policies;
|- |  | -----------------------------------------------------------------------------------------------------



| |  | approving annual operating and capital budgets, major acquisitions and disposals, and risk management policies and limits; and
|- |  | ------------------------------------------------------------------------------------------------------------------------------



| |  | monitoring and reviewing financial performance, risk management activities and controls.
|- |  | ----------------------------------------------------------------------------------------

The role of the Chairman, which is non-executive, is separate from the role of the Group Chief Executive, with clearly-defined responsibilities attaching to each; these are set out in writing and agreed by the Board.

There is a procedure in place to enable the Directors to take independent professional advice, at the Companys expense.

The Company holds insurance cover to protect Directors and Officers against liability arising from legal actions brought against them in the course of
their duties.

Meetings

The Chairman
sets the agenda for each Board meeting. The Directors are provided in advance with relevant papers to enable them to consider the agenda items, and are encouraged to participate fully in the Boards deliberations. Executive management attend
Board meetings and make regular presentations.

The Board met on 11 occasions in 2005. Attendance at those meetings is reported on below.
During a number of those meetings, the Non-Executive Directors met in the absence of the Executive Directors, in accordance with good governance standards. In addition to their attendance at Board meetings, individual Non-Executive Directors
attended board meetings of overseas subsidiaries and held consultative meetings with the Chairman.



51



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##### Table of Contents

Attendance at meetings



|                   |  |      
|------------------ |  | -----
|Dermot Gleeson     |  | 11/11
|Michael Buckley(a) |  | 6/6  
|Adrian Burke       |  | 11/11
|Kieran Crowley     |  | 11/11
|Colm Doherty       |  | 11/11
|Padraic M Fallon   |  | 9/11 
|Don Godson         |  | 10/11
|Sir Derek Higgs(b) |  | 8/8  
|Gary Kennedy       |  | 8/11 
|John B McGuckian   |  | 11/11
|Aidan McKeon       |  | 10/11
|Jim OLeary        |  | 11/11
|Eugene Sheehy(c)   |  | 7/7  
|Michael J Sullivan |  | 11/11
|Robert G Wilmers   |  | 6/11 
|Jennifer Winter    |  | 10/11



|(a) | Retired June 30, 2005
|--- | ---------------------



|(b) | Resigned October 5, 2005
|--- | ------------------------



|(c) | Appointed May 12, 2005
|--- | ----------------------



|(1) | The Code was adopted in 2003 by the Irish Stock Exchange and the UK Listing Authority.
|--- | --------------------------------------------------------------------------------------

Membership

It is the policy of the Board that a
significant majority of the Directors should be Non-Executive. At December 31, 2005, there were 10 Non-Executive Directors and 4 Executive Directors. Non-Executive Directors are appointed so as to maintain an appropriate balance on the Board,
and to ensure a sufficiently wide and relevant mix of backgrounds, skills and experience to provide strong and effective leadership and control of the Group.

The names of the Directors, and their biographical notes, appear on pages 43 and 44. All Directors are required to act in the best interests of the Company, and to bring independent judgment to bear in discharging
their duties as Directors. Mr. Robert G.Wilmers serves as a Director of the Company as the designee of M&T Bank Corporation, in which AIB holds a 23.8% interest. In these circumstances, Mr.Wilmers is not determined to be independent for the
purposes of the Code. The Board has determined that all other Non-Executive Directors are independent in character and judgement and free from any business or other relationship with the Company or the Group that could affect their judgement.While
two of the Non-Executive Directors have served in excess of nine years and are members of the Non-Executive Directors Pension Scheme (the Scheme), both have been determined by the Board to be independent. In that regard, the
benefits accruing to the Directors concerned - Mr. Padraic M. Fallon and Mr. John B. McGuckian - from their historical membership of the Scheme are not considered to be significant to them, and their tenure as Directors has not affected
their ability to bring independent judgment to bear in discharging their duties.

Chairman

Mr. Dermot Gleeson has been Chairman of the Board since October 14, 2003. His responsibilities include the leadership of the Board, ensuring its
effectiveness, setting its agenda, ensuring that the Directors receive adequate, accurate and timely information, facilitating the effective contribution of the Non-Executive Directors, ensuring the proper induction of new Directors, and reviewing
the performance of individual Directors.

Group Chief Executive

The day-to-day management of the Group has been delegated to the Group Chief Executive, Mr. Eugene Sheehy, whose appointment to that position was effective from July 1, 2005. His responsibilities include the
formulation of strategy and related plans, and, subject to Board approval, their execution. He is also responsible for ensuring an effective organisation structure, for the appointment, motivation and direction of the senior executive management,
and for the operational management of all the Groups businesses.

Senior Independent Non-Executive Director

Mr. John B. McGuckian, the Senior Independent Non-Executive Director, is available to shareholders if they have concerns which contact through the normal
channels of Chairman or Group Chief Executive have failed to resolve, or for which such contact is considered by the shareholder(s) concerned to be inappropriate.

Company Secretary

The Directors have access to the advice and services of the Company Secretary, who is responsible for
ensuring that Board procedures are followed and that applicable rules and regulations are complied with.

Performance Evaluation

Evaluations of the performances of the Board, individual Directors, and Board Committees were conducted during the year by the Chairman, using a detailed
questionnaire and meetings with each of the Directors. The results were presented to the Board. An evaluation of the performance of the Chairman was conducted in his absence by the Non-Executive Directors, under the Chairmanship of
Mr. John B. McGuckian, the Senior Independent Non-Executive Director, who had also consulted the Executive Directors.



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##### Table of Contents

Terms of Appointment

Non-Executive Directors are appointed for a three-year term, with the possibility of renewal for a further three years; the term may be further extended, in individual cases, on the recommendation of the Nomination
and Corporate Governance Committee. Following appointment, Directors are required by the Articles of Association to retire at the next Annual General Meeting (AGM), and may go before the shareholders for re-appointment. Subsequently, all
Directors are required to submit themselves for re-appointment at intervals of not more than three years. In 2005, the Directors decided, as a measure of strengthened corporate governance, to retire from office at AGM, and offer themselves for
re-appointment. It is intended that this practice will apply again at the 2006 AGM.

Letters of appointment, as well as dealing with
appointees responsibilities, stipulate that a specific time commitment is required from Directors; (a copy of the standard terms of the letter of appointment of Non-Executive Directors is available from the Company Secretary).

Induction

There is an induction process for new
Directors. Its content varies as between Executive and Non-Executive Directors. In respect of the latter, the induction is designed to familiarize Non-Executive Directors with the Group and its operations, and comprises the provision of relevant
briefing material, including details of the Companys strategic and operational plans, and a programme of meetings with the Heads of Divisions and the senior management of businesses and support functions. Directors also attend external courses
and seminars to update their knowledge.

Board Committees

The Board is assisted in the discharge of its duties by a number of Board Committees, whose purpose is to consider, in greater depth than would be practicable at Board meetings, matters for which the Board retains
responsibility. The composition of such Committees is reviewed annually by the Board. A description of these Committees, each of which operates under terms of reference approved by the Board, and their membership, is given below. The minutes of all
meetings of Board Committees are circulated to all Directors, for information, with their Board papers, and are formally noted by the Board. This provides an opportunity for Directors who are not members of those Committees to seek additional
information or to comment on issues being addressed at Committee level. The terms of reference of the Audit Committee, the Nomination and Corporate Governance Committee, and the Remuneration Committee are available on AIBs website,
www.aibgroup.com.The information found at this website is not incorporated by reference to this document.

Audit Committee

Members: Mr.Adrian Burke, Chairman; Mr. Kieran Crowley; Sir Derek Higgs (to October); Mr. Jim OLeary; and Mr. Michael J Sullivan.

The role and responsibilities of the Audit Committee are set out in its terms of reference.Those responsibilities are discharged
through its meetings and receipt of reports from Management, the Auditors, the Group Internal Auditor, and the Group General Manager, Regulatory Compliance.

The Audit Committee reviews the Groups annual and interim accounts; the scope of the audit; the findings, conclusions and recommendations of the internal and external Auditors; reports on compliance; the nature
and extent of non-audit services provided by the Auditors; and the effectiveness of internal controls. The Committee is responsible for making recommendations on the appointment, re-appointment and removal of the Auditors, ensuring the
cost-effectiveness of the audit, and for confirming the independence of the Auditors, the Group Internal Auditor, and the Group General Manager, Regulatory Compliance, each of whom it meets separately at least once each year, in confidential
session, in the absence of Management. Each of these parties has unrestricted access to the Chairman of the Audit Committee. A written report is submitted annually to the Board, showing the issues considered by the Committee.

There is a process in place by which the Audit Committee reviews and, if considered appropriate, approves, within parameters approved by the Board, any
non-audit services undertaken by the Auditors, and the related fees. This ensures that the objectivity and independence of the Auditors is safeguarded.

The Audit Committee met on eleven occasions during 2005. All the members attended all the meetings held during their terms as members of the Committee, with the exception of Mr. Sullivan, who attended nine
meetings. The following attend the Committees meetings, by invitation: the Auditors; the Group Finance Director; the Group Chief Risk Officer; the Group General Manager, Regulatory Compliance; the Group Internal Auditor and the Group Head of
Accounting and Finance.

Corporate Social Responsibility Committee

Members: Ms. Jennifer Winter, Chairman; Mr. Dermot Gleeson, (Chairman until June, when he stepped down from the Committee); Mr. Kieran Crowley (from June); Mr. Padraic M Fallon.

The role of the Corporate Social Responsibility (CSR) Committee is to recommend Group CSR policies and objectives.

The Committee met on 4 occasions during 2005. All the members attended all the meetings held during their terms as members of the Committee, except
Mr. Fallon, who attended two of the meetings.

Nomination and Corporate Governance Committee

Members: Mr. Dermot Gleeson, Chairman; Mr. Michael Buckley (until June); Mr. Padraic M. Fallon (from June); Mr. Don Godson;
Mr. John B McGuckian; Mr. Eugene Sheehy (from July); and Mr. Michael J Sullivan.

The Nomination and Corporate
Governance Committees responsibilities include: recommending candidates to the Board for appointment as Directors; reviewing the size, structure and composition of the Board; and reviewing succession planning. The Committee is also responsible
for reviewing the Companys corporate governance policies and practices.



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##### Table of Contents

The Committee met on four occasions during 2005. All the members attended all the meetings held during
their terms as members of the Committee, except Mr. McGuckian, who attended two of the meetings.

Remuneration Committee

Members: Mr. Dermot Gleeson, Chairman (until June); Sir Derek Higgs, Chairman (from June to October, when he resigned as a Director);
Mr. John B McGuckian, Chairman (from November); Mr. Don Godson; and Mr. Jim OLeary.

The Remuneration
Committees responsibilities include recommending to the Board: (a) Group remuneration policies and practices; (b) performance-related pay schemes; (c) the operation of incentive schemes; and (d) executive and managerial
salary ranges. The Committee also determines the remuneration of the Group Chief Executive, the other Executive Directors, and the other members of the Group Executive Committee, under advice to the Board.

The Committee met on eleven occasions during 2005. All the members attended all the meetings held during their terms as members of the Committee.

Directors Remuneration

The Report on Directors Remuneration and Interests appears on pages 44 to 47.

Relations with Stockholders

To strengthen communication with shareholders, the Company circulates each year the statutory Annual Report & Accounts and a Summary Review. The Summary Review
is a short, user-friendly booklet explaining features of the Companys performance in the previous year. It also focuses on strategy, performance over the previous five years and interaction with customers and the wider community and also
comments on the membership of the Board, and other issues.

Website

Shareholders have the option of accessing the Annual Report and Accounts on AIBs website, instead of receiving that document by post. The website contains, for the previous five years, the Annual Report and
Accounts, the Interim Report, and the Annual Report on Form 20-F.

The Companys presentations to fund managers and analysts of Annual
and Interim Financial Results are broadcast live on the internet, and may be accessed on http://www.aibgroup.com/webcast. The times of the broadcasts are announced in advance on the website, which is updated with the Companys Stock
Exchange releases, including the trading updates issued in June and December, and formal presentations to analysts and investors. These items are thus available for review by all shareholders with internet access. The information found at this
website is not incorporated by reference to this document.

Annual General Meeting

All shareholders are invited to attend the Annual General Meeting (AGM) and to participate in the proceedings. Shareholders are invited to
submit written questions in advance of the AGM, and the more frequently raised questions are dealt with at the AGM. Subsequently, the Chairman writes to each shareholder who has submitted a question. At the AGM, it is practice to give an update on
the Groups performance and developments of interest, by way of video presentation. Separate resolutions are proposed on each separate issue. The proportion of proxy votes lodged for and against each resolution is indicated; this shows what the
voting position would be if all votes cast, including votes cast by shareholders not in attendance, were taken into account.

The Chairmen
of the Boards Committees are available to answer questions about the Committees activities.

It is usual for all Directors to
attend the AGM and to be available to meet shareholders before and after the Meeting.

A Help Desk facility is available to shareholders
attending.

The Companys 2006 AGM took place on April 26, and the Notice of the Meeting was posted to shareholders on
March 27. This represented a notice period of 30 calendar days and 20 working days.



Institutional Shareholders

The Company held almost 300 meetings with its principal institutional shareholders and with
financial analysts and brokers during 2005. The Group Chief Executive, the Group Finance Director, Heads of Divisions, other Executive Management as requested by shareholders, and the Head of Investor Relations participate in those meetings, at
which care is taken to ensure that price-sensitive information is not divulged. Company representatives also spoke at a number of investor conferences. The Chairman and the Senior Independent Non-Executive Director are available to meet
institutional shareholders, and the links with these shareholders and the communication of their views to the Board were strengthened through the following steps:



| |  | the Chairman wrote to institutional shareholders in Ireland, the UK, Europe and North America, offering to meet them if they considered such meetings to be useful;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the Chairman held discussions with a number of institutional shareholders;
|- |  | --------------------------------------------------------------------------



| |  | the Head of Investor Relations reported on institutional shareholders views to the Board; and
|- |  | ----------------------------------------------------------------------------------------------



| |  | analysts and brokers briefings on the Company were circulated to the Directors, on receipt.
|- |  | ---------------------------------------------------------------------------------------------



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Accountability and Audit

Accounts and Directors Responsibilities

The Accounts and other information presented in this
Report and Accounts are consistent with the Code Principle requiring the presentation of a balanced and understandable assessment of the Companys position and prospects. The Statement concerning the responsibilities of the
Directors in relation to the Accounts appears on page 186.

Going Concern

The Accounts continue to be prepared on a going concern basis, as the Directors are satisfied that the Company and the Group as a whole have the resources
to continue in business for the foreseeable future. In forming this view, the Directors have reviewed the Groups budget for 2006.

Internal
Control

The Directors acknowledge that they are responsible for the Groups systems of internal control and for reviewing their
effectiveness. Guidance (Internal Control: Guidance for Directors on the Combined Code)has been issued by the Irish Stock Exchange and the London Stock Exchange to assist Directors in complying with the Codes requirements
in respect of internal control. That Guidance states that systems of internal control are designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance
against material mis-statement or loss.

The Groups systems of internal control includes:



| |  |  | a clearly-defined management structure, with defined lines of authority and accountability;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | a comprehensive annual budgeting and financial reporting system, which incorporates clearly-defined and communicated common accounting policies and financial control procedures,
including those relating to authorization limits; capital expenditure and investment procedures; physical and computer security; and business continuity planning. The accuracy and integrity of the Groups financial information is confirmed
through Divisional and Group-level reports to the Group Finance Director;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Group Risk Management function, which is responsible for ensuring that risks are identified, assessed and managed throughout the Group;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Group General Manager, Regulatory Compliance, who reports independently to the Audit Committee on the compliance framework across the Group and on managements attention to
compliance matters;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Audit Committee, which receives reports on various aspects of control, reviews the Groups statutory Accounts and other published financial statements and information, and
ensures that no restrictions are placed on the scope of the statutory audit or on the independence of the Internal Audit and Regulatory Compliance functions. The Audit Committee reports to the Board on these matters, and on compliance with relevant
laws and regulations, and related issues;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | appropriate policies and procedures relating to capital management, asset and liability management (including interest rate risk, exchange rate risk and liquidity management),
credit risk management, and operational risk management. Independent testing of the risk management and control framework is undertaken by the Internal Audit function;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regular review by the Board of overall strategy, business plans, variances against budgets and other performance data.
| | - |  | ----------------------------------------------------------------------------------------------------------------------

The Groups structure and on-going processes for identifying, evaluating and managing the significant credit, market and operational risks faced by
the Group are described in pages 64 to 72. Those processes are regularly reviewed by the Board, and accord with the above-mentioned Guidance.

The Directors confirm that, with the assistance of reports from the Audit Committee and Management, they have reviewed the effectiveness of the Groups systems of internal control for the year ended December 31, 2005. The Audit
Committee, on behalf of the Board, monitors the preparations being made by the Group to ensure compliance, by the prescribed December 31, 2006 deadline, with the requirements of Section 404 of the U.S. Sarbanes Oxley Act 2002, which
requires, inter alia, Management to include in the Annual Report on Form 20-F its assessment of the effectiveness of internal controls over financial reporting.

Compliance Statement

The foregoing explains how the Company has applied the principles set out in the Code. The Company has
complied, throughout 2005, with the Codes provisions.

A brief description of the significant differences between AIBs
corporate governance practices and those followed by U.S. companies under the NewYork Stock Exchanges listing standards is provided on AIBs website: www.aibgroup.com.Except in respect of the significant differences in corporate
practices, the information found at this website is not incorporated by reference into this document.



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##### Table of Contents

Employees

During the year ended December 31, 2005 AIB Group employed approximately 23,300 staff (2004:
approximately 22,800) on a world wide basis in the Republic of Ireland, Northern Ireland, Great Britain, USA, and Poland operating out of approximately 760 (2004: 770) offices.

AIB Group offers a wide range of employee relations programs and the continued success of the Group, in part, can be attributed to the positive
commitment of employees in each of the areas in which it operates.

The sole recognized trade union for bank officials in the Republic of
Ireland, Northern Ireland, and Great Britain is the Irish Bank Officials Association (IBOA). Since February 2000 AIB and the IBOA have conducted their relations in keeping with agreed Partnership principles, which underpin the approach to be
taken in employee and industrial relations. In 2005, the second phase of this Partnership was announced. This focuses on creating a closer link between the staff relations agenda and the strategic priorities of the business. Partnership also allows
for increased involvement by staff in change and decision making.

The AIB European Staff Forum is also active. AIB uses the Forum to
provide information, exchange views and consult with staff members on issues which affect the Groups operations across national boundaries within Europe. Staff members are also afforded the opportunity of meeting with and providing feedback to
management by means of a staff consultative process known as AIB Consult in AIB Bank, and Staff Consultative group in AIB Capital Markets.

AIB encourages its staff to raise any concerns of wrongdoing through many channels both internal and external. The AIB Speak-Up policy re-affirms the commitment and provides a number of alternative channels for staff to raise any concerns,
including a confidential external helpline.

In the Republic of Ireland, the national collective pay agreement Sustaining
Progressconcluded in April 2006 and negotiations are underway to establish a programme to succeed it. In 2005, the agreement provided for two general pay increases - 1.5% which was paid in May, and a final 2.5% which was paid in November
2005.

In 2005, Northern Ireland (First Trust Bank) had a pay settlement of 3.2% while in Great Britain (Allied Irish Bank) a general
annual pay increase of 3.1% was agreed.

The average salary increase in the Poland division amounted to 3.5%. In 2005, the manpower level
changes were driven by the dynamic business growth of BZWBK subsidiaries, organizational changes in the banks Business Support Centre (Head office) and continued process of resources allocation in the branch network.

The average number of employees by division were as follows;



|                 |  |                          |  |       
|---------------- |  | ------------------------ |  | ------
|                 |  | Years ended December 31,
|                 |  | 2005                     |  | 2004  
|                 |  |                          |  |       
|AIB Bank ROI     |  | 9,672                    |  | 9,438 
|AIB Bank GB & NI |  | 2,997                    |  | 2,918 
|Capital Markets  |  | 2,536                    |  | 2,478 
|Poland           |  | 7,312                    |  | 7,298 
|Group            |  | 758                      |  | 647   
|                 |  |                          |  |       
|Total            |  | 23,275                   |  | 22,779
|                 |  |                          |  |       



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##### Table of Contents

|Item 7. | Major shareholders and related party transactions
|------- | -------------------------------------------------

Major shareholders

AIB is not directly or indirectly owned or controlled by another corporation or any foreign
government. There are no arrangements known to AIB, the operation of which may at a subsequent date result in a change of control of AIB.

The following substantial interest in the Ordinary Share Capital had been notified to the Company at February 21, 2006:

Bank
of Ireland Asset Management Limited 5.45% (excluding Treasury Shares 5.72%).

None of the clients on whose behalf these shares are held had
a beneficial interest in 3% or more of the Ordinary Share Capital.

Related party transactions

(a) Transactions with subsidiary undertakings

In accordance with IAS 24 - Related Party Disclosures, transactions or balances between Group entities that have been eliminated on consolidation are not reported.

(b) Associated undertakings and joint ventures

From
time to time, the Group provides certain banking and financial services for associated undertakings. Details of loans to associates are set out in Note 25, while deposits from associates are set out in Note 36 of the notes to the consolidated
financial statements.

(c) Provision of banking and related services to Group Pension Funds, unit trusts and investment funds managed by Group Companies

The Group provides certain banking and financial services for the AIB Group Pension Funds and also for unit trusts and investment funds managed by
Group companies. Such services are provided on terms similar to those that apply to third parties and are not material to the Group.

d) Compensation of
Key Management Personnel

The following disclosures are made in accordance with the provisions of IAS 24 - Related Party Disclosures,in respect
of the compensation of key management personnel. Under IAS 24,Key Management Personnel are defined as comprising the companys directors (executive and non-executive) together with the senior executive officers, viz., the members of
the Group Executive Committee (see pages 43 and 44) and the Chief Financial Officer, up to the date of his retirement on September 30, 2005. The figures shown below include figures separately reported in respect of directors remuneration
on pages 44 to 47.



|                                |  |                    |  |     
|------------------------------- |  | ------------------ |  | ----
|                                |  | 2005               |  | 2004
|                                |  | (Euro in millions)
|Short-term employee benefits(1) |  | 11.2               |  | 7.7 
|Post-employment benefits(2)     |  | 6.3                |  | 1.9 
|Termination benefits(3)         |  | 0.9                |  |    
|Equity compensation benefits(4) |  | 1.8                |  | 0.7 
|                                |  |                    |  |     
|Total                           |  | 20.2               |  | 10.3
|                                |  |                    |  |     



|(1) | comprises (a) in the case of executive directors and the other senior executive
officers; salary, directors fees, bonus, profit share scheme benefits, medical insurance, benefit-in-kind arising from preferential loans and use of company car (or payment in lieu), and other short-term benefits, and (b) in the case of
non-executive directors; directors fees. Figures for 2005 relate to 5 executive directors (2004:4); - see Compensation on page 44; 9 other senior executive officers (2004:4) and 10 non-executive directors (2004:11), excluding
Mr. R.G.Wilmers, fees in respect of whose service as a designated director of M&T Bank Corporation (M&T) amounting to 35,000, were paid to M&T.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | comprises (a) payments to defined benefit pension schemes, in accordance with
actuarial advice, to provide post-retirement pensions from normal retirement date in respect of 5 executive directors (2004:4), 2 non-executive directors (2004:2), and 9 other senior executive officers (2004:4); (b) one-off payments in 2005 to
such schemes to meet liabilities arising from augmented pension benefits paid on retirement in respect of 2 executive directors and 2 senior executive officers; (c) the payment of pensions to former directors or their dependants, granted on an
ex gratia basis; and (d) an amount of 650,000 (2004: 650,000) to amortize a deficit in the Non-Executive Directors Pension Scheme, in accordance with actuarial advice;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | lump sum payments made on retirement to two senior executive officers, neither of whom was
a director;
|--- | ------------------------------------------------------------------------------------------------------



|(4) | the value of awards made to executive directors and other senior executive officers under
the companys share option scheme and long term incentive plans (which are described in Note 13 to the consolidated financial statements); the value shown, which has been determined by applying the valuation techniques described in Note 13,
relate to 3 executive directors and 9 senior executive officers in 2005 (2004:3 executive directors and 5 senior executive officers).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

(e) Loans to Directors and Other Senior Executive Officers

Loans to non-executive Directors are made in the ordinary course of business on normal commercial terms. Loans to executive directors and other senior executive officers
are made (i) on terms applicable to other employees in the Group, in accordance with established policy, within limits set on a case by case basis, and/or (ii) otherwise, on normal commercial terms. The following amounts were outstanding
at year-end in loans, or quasi-loans (effectively, credit card facilities) to persons who at any time during the year were directors or other key management personnel:



|                                    |  |                                             |   |  |                  |   |  |       |   |  |             |  
|----------------------------------- |  | ------------------------------------------- | - |  | ---------------- | - |  | ----- | - |  | ----------- | -
|                                    |  | December 31 2005                            |   |  | December 31 2004 |  
|                                    |  | (Euro in millions except number of persons) |  
|                                    |  | Loans                                       |   |  | Quasi-loans      |   |  | Loans |   |  | Quasi-loans |  
|A. Directors                        |  | 2.6                                         |   |  | 0.04             |   |  | 3.4   |   |  | 0.04        |  
|(number of persons)                 |  | (6                                          | ) |  | (8               | ) |  | (8    | ) |  | (8          | )
|B. Other Key Management Personnel * |  | 2.1                                         |   |  | 0.03             |   |  | 1.8   |   |  | 0.01        |  
|(number of persons)                 |  | (6                                          | ) |  | (8               | ) |  | (4    | ) |  | (5          | )
|                                    |  |                                             |   |  |                  |   |  |       |   |  |             |  
|Total                               |  | 4.7                                         |   |  | 0.07             |   |  | 5.2   |   |  | 0.05        |  
|(number of persons)                 |  | (12                                         | ) |  | (16              | ) |  | (12   | ) |  | (13         | )



|* | Group Executive Committee members (other than executive directors, whose figures are included in the totals at A) and the Chief Financial Officer
|- | -------------------------------------------------------------------------------------------------------------------------------------------------

(f) Indemnities

On February 2, 2004,AIB Capital Markets plc, a
wholly-owned subsidiary, extended the terms of an indemnity previously given to certain former directors, officers and employees of Govett Investment Management Ltd. (Govett) - now AIB Investment Management Limited - to
Mr. Michael Buckley, the former Group Chief Executive, and Mr. Colm Doherty, Managing Director, AIB Capital Markets; Mr. Buckley is a former director of a split capital trust managed by Govett, and Mr. Doherty is a former
director of Govett. The aggregate liability of AIB Capital Markets plc, under the aforementioned indemnity is 10 million.

The
purpose of the indemnity is to protect the indemnified parties (or any of them) against any civil liability, loss and defence costs which they (or any of them) may suffer by reason of any claim made against them relating to certain split capital or
highly leveraged trusts previously managed by Govett and which previously would have been covered by insurance.

Prior to July 2003, the
Banks professional indemnity and directors and officers liability insurance provided cover in respect of the eventualities mentioned in the previous paragraph. However, on renewal of that insurance on July 1, 2003, and in line
with a general change introduced by the insurance industry, exclusions were imposed that removed that cover. By virtue of the terms of the above-mentioned indemnity, the indemnified parties now stand in the position they would have been in if those
exclusions had not been imposed, except that the aggregate limit of liability under the indemnity is 10 million rather than the higher amount previously provided by the insurance.

Allied Irish Banks, p.l.c. has indemnified the Directors of Allied Irish Banks Pensions Limited and AIB DC Pensions (Ireland) Limited, the trustees of
the Groups Republic of Ireland defined benefit and defined contribution pension schemes, respectively, against any actions, claims or demands arising out of their actions as Directors of the trustee companies, other than by reason of wilful
default. Mr.Adrian Burke, a Director of the Company, is a Director of the above-mentioned trustee companies.

(g) Mr. Gary Kennedy

On June 24, 2005, the Group announced that Mr. Gary Kennedy was to leave his position as Group Director, Finance & Enterprise Technology, and become
special adviser to the Group on finance and risk. Mr. Kennedy ceased to be Group Director, Finance & Enterprise Technology and resigned as a director of the company on December 31, 2005. Under the agreement reached with him,
Mr. Kennedys employment as special adviser on finance and risk does not preclude him taking other employment and will cease on January 31, 2008, whereupon he will be entitled to a pension in the amount shown on page 45. The agreement
also provided that he would receive (a) a payment of 579,600 by way of compensation for loss of office, and (b) reasonable expenses in connection with pension, taxation and other advice and a sum of 150,000 in respect of legal
fees.This was approved by shareholders at the 2006 Annual General Meeting.



|Item 8. | Financial information
|------- | ---------------------

Consolidated statements and other
financial information

(See Item 18 & 19  Financial Statements and Exhibits on pages 87 to 192 of this report).

Significant changes

No significant changes have occurred since the date of the Annual Financial Statements
included in this annual report. Detailed below are legal proceedings and prospective accounting changes arising from recently issued International Financial Reporting Standards and from accounting standards recently issued in the United States.

Legal proceedings

On March 5, 2002 and on
April 24, 2002, separate class action lawsuits under the Securities Exchange Act, 1934 of the United States were filed in the United States District Court for the Southern District of New York against AIB,Allfirst and certain serving and past
officers and directors of Allfirst and its subsidiaries, seeking compensatory damages, legal fees and other costs and expenses relating to alleged misrepresentations in filings of AIB and Allfirst. On May 3, 2002, a motion to consolidate both
cases and to appoint a lead plaintiff was filed with the Court. On December 7, 2004 the Court granted this motion. In accordance with the direction of the Court, the plaintiffs filed an amended and consolidated complaint on February 7,
2005. Certain of the defendants (including AIB and Allfirst) filed a motion to dismiss the consolidated amended complaint on April 8, 2005. In December 2005 a settlement was reached, under which all claims are to be dismissed without any
admission of liability or wrongdoing by any defendant. The class of security holders will receive a cash payment of US$ 2.5 million, out of which the Court will be asked to award Attorneys fees to class counsel. The settlement must be
approved by the Court.

On May 13, 2002, a purported shareholder derivative action was filed in the Circuit Court for Baltimore City,
Maryland. A holder of AIB American Depositary Shares purported to sue certain present and former directors and officers of Allfirst Bank on behalf of AIB, alleging those persons were liable for the foreign exchange trading losses. No relief was
sought in the purported derivative action against AIB, Allfirst or Allfirst Bank. On December 30, 2002, the Court dismissed the action. On January 10, 2003,



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##### Table of Contents

the plaintiffs filed a motion seeking to have the Court amend or revise the judgement, or to be granted leave to file an amended complaint. This was
dismissed on March 3, 2003. The plaintiffs filed a second such motion on March 17, 2003. The Court dismissed this on April 4, 2003. On June 20, 2003, the plaintiffs petition to bypass the Maryland Court of Special Appeals
and appeal directly to the Maryland Court of Appeals was denied by the Maryland Court of Appeals. The plaintiffs appeal to the Maryland Court of Special Appeals was argued on January 12, 2004. On December 3, 2004 the Maryland Court
of Special Appeals affirmed the dismissal of the action. On January 21, 2005, the plaintiff petitioned the Maryland Court of Appeals to hear an appeal from this decision. Oral argument on this appeal was heard on September 1, 2005 and
judgment delivered on December 13, 2005. By a vote of six to one, the Court upheld the judgment of the Court of Special Appeals affirming the dismissal of the action. On January 11, 2006 the Attorneys for the Plaintiff filed a motion
asking the Court of Appeals to reconsider its decision. On February 6, 2006 the Court of Appeal dismissed this motion.

Certain of the
individual defendants in these actions have asserted or may possibly assert claims for indemnification against AIB and/or Allfirst, which, if made against Allfirst following completion of the M&T transaction, might be subject to the
indemnification obligations of AIB as part of the agreement with M&T. In the nature of any such claims, it is not possible to quantify the amount which might be asserted in any such claim. On the basis of current information, the Board of
Directors of AIB do not believe that any of the above proceedings are likely to have (either individually or in the aggregate) a significant effect on the financial position of AIB and its subsidiaries taken as a whole.

Prospective accounting changes

International Financial
Reporting Standards

The following standards/amendments to standards have been approved by the International Accounting Standards Board
(IASB), and were adopted by the EU in January 2006 but not early adopted by the Group. These will be adopted in 2006 and thereafter:-

Amendment to IAS 1 - Capital disclosures (effective January 1, 2007). This amendment requires disclosure, both quantitative and qualitative, of an entitys objectives, policies and processes for managing capital. The impact is not
expected to be material in terms of Group reporting.

Amendments to IAS 39 - Cash Flow Hedge Accounting of Forecast Intragroup transactions
(effective January 1, 2006). This amendment, which is not expected to have a material impact on Group reporting, will allow the foreign currency risk of intragroup monetary items qualify as the hedge item in certain circumstances in the
consolidated financial statements.

Amendments to IAS 39 and IFRS 4: Financial Guarantee Contracts (effective January 1, 2006). This
amendment will be adopted by the Group in the accounting period commencing on January 1, 2006 and requires financial guarantee contracts to be accounted for as financial instruments under IAS 39 unless they have been explicitly dealt with as
insurance contracts in the past in which case the previous accounting may continue. This standard is not expected to have a material impact on the Group.

IFRS 7 - Financial Instrument disclosures (effective January 1, 2007). This standard updates and augments the disclosure requirements of IAS 30, IAS 32 and IFRS 4 and will require additional disclosures relating
to risk management policies and processes. The disclosure requirements are both qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity
risk and market risk. The qualitative disclosures describe managements objectives, policies and processes for managing those risks. The quantitative disclosures provide information about the extent to which the entity is exposed to risk, based
on information provided internally to the entitys key management personnel.

US GAAP

In May 2005 the FASB issued Statement of Financial Accounting Standards (SFAS) No. 154 Accounting Changes and Error Corrections. In many, but
not all aspects, SFAS 154 converges with IAS 8 Accounting Policies, changes in Accounting Estimates and Errors, in the accounting and reporting of accounting changes and corrections of errors. SFAS 154 is effective for fiscal years
beginning after December 15, 2005. Adoption is not expected to have a material impact on the US GAAP information in the Groups financial statements.

In June 2005, the FASB Emerging Issues Task Force (EITF) issued EITF 04-5 Determining whether a General Partner, or General Partners as a Group, Controls a Limited Partnership or Similar Entity when
the Limited Partners Have Certain Rights. EITF 04-5 has a presumption that the general partner in a limited partnership or similar entity, such as a limited liability company, has control unless the limited partners have substantive kick-out
rights or participating rights. The guidance contained in the EITF is effective no later than the beginning of the first reporting period beginning after December 15, 2005. The Group is currently considering the impact that adoption of EITF
04-5 will have on its US GAAP financial statements.



In
November 2005, the FASB released FASB Staff Position FSP FAS 115-1 The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments which supersedes the guidance provided by EITF 03-1 The Meaning of
Other-Than-Temporary Impairment and its Application to Certain Investments. FSP FAS 115-1 clarifies when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. FSP FAS
115-1 is effective for fiscal years beginning after December 15, 2005. The Group is currently considering the impact that adoption of FSP FAS 115-1 will have on its US GAAP financial statements.

SFAS 155 Accounting for Certain Hybrid Financial Instruments was issued by the FASB in February 2006. SFAS 155 permits fair value measurement
for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation. An irrevocable election may be made to initially and subsequently measure such a hybrid financial instrument at fair value, with
changes in fair value recognized through income. Such election needs to be supported by concurrent documentation. SFAS 155 is effective for financial years beginning after September 15, 2006, with early adoption permitted. The Group is
currently considering the impact that adoption of SFAS 155 will have on its US GAAP financial statements.

SFAS No. 123R
Share based payment was issued in December 2004 and requires the expensing of stock options, superseding APB Opinion No. 25 Accounting for stock issued to employees. This standard will be effective from 2006 onwards.



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|Item 9. | Offer & Listing
|------- | ---------------

Offer and listing details

Trading market for Ordinary shares of AIB

At December 31, 2005,AIB had outstanding 918,435,570 ordinary shares of 0.32 each, of which 43,539,597 were held as Treasury Shares (see note 46 to the consolidated financial statements). The principal trading markets for AIB
ordinary shares are the Irish Stock Exchange and the London Stock Exchange. Listing of the ordinary shares, in the form of American Depositary Shares (ADS), was obtained on the New York Stock Exchange (NYSE) effective
November 28, 1990. Each ADS, which comprises two ordinary shares, is traded under the symbol AIB and is evidenced by an American Depositary Receipt (ADR). The ADR depositary is The Bank of New York.

At December 31, 2005, a total of 45.5 million ADSs were outstanding, representing 10% of total outstanding ordinary shares held by 4,215
registered stockholders and an estimated 12,000 stockholder accounts in street names. Since certain of the ordinary shares and ADRs were held by brokers or other nominees, the number of recorded holders in the US may not be representative of the
number of beneficial holders or of their country of residence.

The following table sets forth the high and low sales prices of the
ordinary shares during the periods indicated, based on mid-market prices at close of business on the Irish Stock Exchange and the high and low sales prices for ADSs, as reported on the NYSE composite tape.



|                        |  |                      |  |                               |  |          |  |         
|----------------------- |  | -------------------- |  | ----------------------------- |  | -------- |  | --------
|                        |  | 0.32 Ordinaryshares |  | American Depositary Shares(1)
|                        |  | High                 |  | Low                           |  | High     |  | Low     
|                        |  | (Euro)               |  | (Dollars)                    
|Year ended December 31, |  |                      |  |                               |  |          |  |         
|2001                    |  | 13.80                |  | 9.31                          |  | 25 9/16  |  | 17      
|2002                    |  | 15.70                |  | 10.92                         |  | 29 1/5   |  | 19 10/13
|2003                    |  | 14.38                |  | 11.50                         |  | 32 20/23 |  | 24 43/50
|2004                    |  | 15.35                |  | 11.60                         |  | 41 11/20 |  | 27 98/99
|2005                    |  | 18.64                |  | 15.20                         |  | 44 32/33 |  | 39 20/69
|Calendar year           |  |                      |  |                               |  |          |  |         
|2004                    |  |                      |  |                               |  |          |  |         
|First quarter           |  | 13.90                |  | 11.95                         |  | 34 9/10  |  | 29 8/47 
|Second quarter          |  | 12.88                |  | 11.60                         |  | 31 8/89  |  | 27 98/99
|Third quarter           |  | 13.60                |  | 12.20                         |  | 33 11/20 |  | 29 41/50
|Fourth quarter          |  | 15.35                |  | 13.46                         |  | 41 11/20 |  | 33 3/7  
|2005                    |  |                      |  |                               |  |          |  |         
|First quarter           |  | 16.50                |  | 15.20                         |  | 43 9/29  |  | 39 20/69
|Second quarter          |  | 18.04                |  | 15.75                         |  | 43 36/61 |  | 40 11/20
|Third quarter           |  | 18.20                |  | 17.20                         |  | 44 32/33 |  | 41 16/25
|Fourth quarter          |  | 18.64                |  | 16.59                         |  | 43 4/5   |  | 39 17/20
|Month ended             |  |                      |  |                               |  |          |  |         
|November 2005           |  | 18.33                |  | 17.14                         |  | 43 4/57  |  | 40 20/87
|December 2005           |  | 18.64                |  | 17.65                         |  | 43 4/5   |  | 42 44/83
|January 2006            |  | 18.54                |  | 17.82                         |  | 43 1/10  |  | 43 10/37
|February 2006           |  | 20.20                |  | 18.20                         |  | 47 4/5   |  | 43 21/25
|March 2006              |  | 19.81                |  | 18.90                         |  | 47 12/25 |  | 45 4/25 
|April 2006              |  | 19.75                |  | 18.50                         |  | 47 25/25 |  | 45      

---

|(1) | An American Depositary Share represents two ordinary shares of 0.32 each.
|--- | -------------------------------------------------------------------------

Trading market for Preference shares of AIB

In May 1998,AIB issued 250,000 non-cumulative Preference shares, Floating Rate Series A. These ADSs have not been and will not be registered under the Securities Act and will be traded in the United States only by
Qualified Institutional Buyers (QIBs) in reliance on Rule 144A under the Securities Act and to non-US persons in reliance on Regulation S.



Markets

(See Item 9  Offer and listing details above).



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|Item 10. | Additional information
|-------- | ----------------------

Memorandum & Articles of Association

A copy of the Memorandum & Articles of Association of
Allied Irish Banks, p.l.c. was previously filed as part of the Annual Report on Form 20-F for the year ended December 31, 2002. The special resolutions passed at the 2006 Annual General Meeting are attached as Exhibit I.I of this Annual Report
on Form 20-F.

Exchange controls

Under Article 56 of the Treaty establishing the European Community, all restrictions on the
movements of capital between member states of the European Union and between such member states and third countries are prohibited.

Under
Article 59 of the Treaty where, in exceptional circumstances, movements of capital to or from third countries cause, or threaten to cause, serious difficulties for the operation of economic and monetary union, the Council of European Union, acting
by a qualified majority and a proposal from the European Commission, and after consulting the European Central Bank, may take safeguard measures with regard to third countries for a period not exceeding six months if such measures are strictly
necessary.

Under Article 60 of the Treaty, the Council acting by a qualified majority, on a proposal from the European Commission, may
take action to interrupt or reduce capital movements and payments in respect of third countries where a common position or a joint action according to the provisions of the Treaty of the European Union relating to the common foreign and security
policy of the Union has been adopted. As long as the Council has not taken any such action a Member State, for serious political reasons and on grounds of urgency, may take unilateral measures against a third country in respect of capital movements
and payments but the Council may, acting on a qualified majority on a proposal from the Commission, decide that the Member State concerned is to amend or abolish such measures.

There are no restrictions under AIBs Articles of Association or under Irish law, as currently in force, that limit the right of non-resident or
foreign owners, as such, to hold securities of AIB freely or, when entitled, to vote such securities freely. There are currently no restrictions under Irish law, decrees, or regulations affecting the remittance of dividends or other payments to
nonresident holders of AIB securities except in respect of the making available, directly or indirectly, of funds (defined as including dividends) to or for the benefit of (a) Mr Slobodan Milosevic and certain persons associated
with him, under EC Council Regulation No. 2488/2000 of November 10, 2001 (as amended); (b) certain persons and entities associated with Osama Bin Laden, the Al-Qaida network and the Taliban of Afghanistan under EC Council Regulation
No. 881/2002 of May 27, 2002 (as amended) (c) certain persons involved in governmental functions in Burma/Myanmar being persons designated under EC Council Regulation No. 798/2004 of April 26, 2004 (as amended)
(d) certain persons involved in the Government of Zimbabwe and persons or bodies associated with them, under EC Council Regulation No. 314/2004 of February 19, 2004 (as amended); (e) Former President Saddam Hussain, senior
officials of his regime, immediate members of their families and persons, bodies or entities owned or controlled directly or indirectly by those persons, or by any person acting on their behalf or at their direction, and (in respect of funds located
outside Iraq on or after May 22, 2003) the previous Government of Iraq, or any of the bodies, corporations or agencies identified under EC Council Regulation No. 1210/2003 of July 7, 2003 (as amended); (f) former Liberian
President Charles Taylor and the members of his family and other persons and entities identified in EC Council Regulation No. 872/2004 of April 29, 2004 (as amended); (g) certain persons acting in violation of the arms embargo with
regard to the Democratic Republic of the Congo identified under EC Council Regulation No. 1183/2005 of July 18, 2005 (as amended); (h) certain persons indicted by the International Criminal Tribunal for the former Yugoslavia
identified under EC Council Regulation No. 1763/2004 of October 11, 2004 (as amended); (i) certain persons, or entities identified, in view of the situation in the Ivory Coast, under EC Council Regulation No. 560/2005 of
April 12, 2005 (as amended); and (j) persons, entities or bodies impeding the peace process and breaking international law in the conflict in the Darfur region in Sudan identified under EC Council Regulation No. 1184/2005 of
July 18, 2005 (as amended). All of these exceptions arise from United Nations and/or European Union sanctions.

Taxation

The discussion set forth below is intended only as a descriptive summary of certain consequences to
Eligible US Holders (as defined below) of the purchase, ownership and disposition of AIB shares or ADSs and is not a complete technical analysis or listing of all potential tax effects or considerations that may be relevant. This summary deals only
with Eligible US Holders that hold AIB shares or ADSs as capital assets for Irish and US Federal income tax purposes. This discussion does not deal with the tax consequences for all categories of investors, some of which (including persons liable
for alternative minimum tax, insurance companies, tax-exempt organizations and dealers in securities) may be subject to special rules. Holders of any interest in AIB shares or ADSs are advised to consult their own tax advisors as to the Irish,
United States or any other tax consequences of the purchase, ownership and disposition of an interest in AIB shares or ADSs, including the effect of any foreign, state or local tax laws.

For purposes of this discussion an Eligible US Holder is a beneficial owner of Ordinary or Preference shares or ADSs who is (a) a
resident of the United States for the purposes of US Federal income tax, (b) not a resident of Ireland for the purposes of Irish taxes, and (c) not engaged in trade or business in Ireland through a permanent establishment.

This summary is based upon the Double Taxation Convention currently in effect between Ireland and the United States (the Tax Treaty), and tax
laws, judicial decisions, regulations and administrative rulings and practices of Ireland and the United States as currently in effect and all of which are subject to change at any time.

Eligible US Holders of ADSs will be treated as the owners, as appropriate, of the underlying Ordinary or Preference shares for United States Federal
income tax purposes and for purposes of the Tax Treaty.



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Irish taxation

Dividends.Dividends paid by AIB with respect to AIB shares or ADSs and received by an Eligible US Holder who is a person other than a company and who is not ordinarily resident in Ireland in a year of
assessment are not liable to Irish income tax. Dividends paid by AIB with respect to AIB shares or ADSs and received by an Eligible US Holder who is a company, are not liable to Irish income tax provided the Eligible US Holder is not under the
control (direct or indirect) of a person or persons who are Irish Resident.

Withholding Tax on Dividends.Dividends paid by Irish
companies in respect of ordinary or preference shares are subject to dividend withholding tax (DWT). The rate of DWT is 20% for dividends paid with effect from April 6, 2001.

Individuals/trusts holding AIB shares.A person beneficially entitled to the dividend who is an individual, is an Eligible US Holder and is not
ordinarily resident in Ireland may be entitled to exemption from DWT in respect of the dividend paid. A claim for exemption must be accompanied by a declaration in a format approved by the Irish Revenue Commissioners, which, in the case of an
individual resident in the United States of America, is certified to that effect by the Internal Revenue Service. The declaration contains additional requirements where the dividends are received by a trust.

Companies holding AIB shares.A company which is an Eligible US holder that is beneficially entitled to the dividend may, subject to certain
conditions and to the completion of a declaration, be entitled to exemption from DWT in respect of the dividend paid. The declaration must be in a format approved by the Irish Revenue Commissioners. The companys auditor must certify on the
declaration that certain conditions, these being conditions which entitle the company to exemption, have been satisfied. In addition, in certain circumstances the declaration must also be certified by the companys local Revenue authority (the
US Internal Revenue Service in the case of US resident companies).

Claims for exemption must be filed with AIBs Registrar in advance
of the relevant dividend payment record date. In the absence of a change in the persons circumstances such declarations are valid for a period of 5 years. Declaration forms may be obtained either from the AIBs Registrar at the following
address:

Computershare Investor Services (Ireland) Ltd, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland.

Telephone:+353-1-247 5411, Facsimile:+353-1-216 3151, e-mail: web.queries@computershare.ie; or from the Irish Revenue

Commissioners at the following address:

DWT
Section, Office of the Revenue Commissioners, Government Offices, St Conlans Road, Nenagh, County Tipperary, Ireland.

Telephone:
+353-67-33533, Facsimile: +353-67-33822, e-mail: infodwt@revenue.ie.

Individuals and Companies holding ADSs.Persons holding ADSs,
evidenced by ADRs, who are beneficially entitled to the dividend and whose address in the register of ADRs is in the United States, are exempt from DWT. This is conditional on the depository bank, in whose books the ADRs are registered, becoming a
qualifying intermediary (QI) (as defined in Section 172E Irish Taxes Consolidation Act 1997), and entering into an agreement with the Irish Revenue Commissioners. The Bank of New York is a QI and has entered into such an
agreement. Where the registered owner is not the beneficial owner and the ADSs are in turn held through one or more specified intermediaries (as defined in Section 172F Irish Taxes Consolidation Act 1997), dividends may still be paid without
DWT provided the address of the beneficial owner of the ADSs, as shown in the register of the ultimate specified intermediary, is located in the United States.

Repayment or credit for DWT.Eligible US Holders who have DWT deducted from their dividend may, subject to certain conditions, be entitled to a refund by making an application to the Irish Revenue Commissioners
at the address shown above. Where entitlement to repayment under Irish domestic law cannot be established, the provisions of the Tax Treaty may apply. The provisions of the Tax Treaty can limit the Irish tax liability of an Eligible US Holder, who
is unable to claim repayment of the full DWT deducted from the dividend, to 15% of the aggregate of the cash dividend and related DWT (the gross amount). In such circumstances, the Eligible US Holder may claim repayment from the Irish
Revenue Commissioners under the provisions of the Tax Treaty of the amount of DWT in excess of 15% of the gross dividend.

Subject to
limitation contained in the Code (as defined below in the paragraph entitled United States income taxation), the Tax Treaty provides that the US shall allow to an Eligible US Holder who receives a dividend, the balance (15%) of the
Irish tax paid by such Eligible US holder, as a foreign tax credit against US Federal income tax liability. See discussion of US taxation on page 63.

Gain on sale, exchange or other disposition.A gain realized on the sale, exchange or other disposition of the Ordinary shares or the Preference shares (including redemption of the Preference shares) or ADSs by
a beneficial owner thereof that is neither resident nor ordinarily resident in Ireland for Irish tax purposes is not subject to Irish capital gains tax, except where such Ordinary or Preference shares or ADSs constitute assets situated in Ireland
and are or were used in or for the purposes of a trade carried on by such beneficial owner in Ireland through a branch or agency.



Irish Stamp Duty.Under current Irish legislation, no stamp duty is payable in Ireland on transfers of, or agreements to transfer ADRs where the
ADRs (or the underlying securities which they represent) are dealt in and quoted on a recognized stock exchange in the United States. The AIB Ordinary shares that are listed and traded on the New York Stock Exchange (NYSE), in the form
of ADSs evidenced by ADRs, fall within this exemption. For so long as the Preference share ADSs continue to be Portal designated securities on the Portal Market, they will be regarded as being dealt in and quoted on a recognized Stock Exchange
in the United States of America and, by concession of the Irish Revenue Commissioners, transfers, or agreements to transfer the Preference share ADS will be exempt from Irish stamp duty.



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In the case of a transfer or sale of AIB Ordinary or Preference shares, stamp duty will be charged at the
rate of 1% of the amount or value of the consideration (i.e. the purchase price).

The deposit of shares with the Depositary in exchange
for ADSs or the surrender of the ADSs to the Depositary in return for shares where the deposit or surrender does not relate to a sale or contemplated sale or mortgage of such AIB Ordinary or Preference shares, such as a conveyance or transfer as a
result of which there is no change in beneficial interest, will not be chargeable to duty provided the instrument of transfer contains a statement to that effect. Where there is a deposit of shares with the depositary in exchange for ADS or the
surrender of the ADS to the depositary in return for shares which is done as a conveyance on sale or in contemplation of sale, then stamp duty may be payable at the rate of 1% of the price paid.

Inheritance and gift taxation. See United States and Irish Inheritance and Gift Taxation on page 64.

United States income taxation

Dividends.Dividends received by an Eligible US Holder of an Ordinary or a Preference share or an ADS are taxable as dividend income for US Federal income tax purposes to the extent of AIBs current or accumulated earnings and profits, as determined
under US Federal income tax principles pursuant to the Internal Revenue code of 1986, as amended (Code). Distributions in excess of current or accumulated earnings and profits would be treated as a non-taxable return of capital to the
extent of the US Holders basis in his Ordinary or Preference shares or ADSs and would reduce the US holders basis in his Ordinary or Preference shares or ADSs. Any remaining excess would be treated for US Federal tax purposes as capital
gains, provided the Ordinary or Preference shares or ADSs are capital assets in the hands of such US Holder.

In May 2003 the U.S. reduced
to 15% the tax rate on dividends received by individuals after December 31, 2002 and before January 1, 2009, from qualified foreign corporations. Dividends paid by AIB with respect to Ordinary shares, Preference shares or ADSs will
generally be qualified dividend income for U.S. tax purposes, provided US Holders meet certain holding period requirements. Holders of Ordinary Shares or ADSs must have held their shares for more than 60 days during the 120-day period beginning 60
days before the ex-dividend date. Holders of Preference shares must have held their shares for more than 90 days during the 180-day period beginning 90 days before the ex-dividend date.

Dividends paid by AIB with respect to Ordinary shares, Preference shares and ADSs, will not qualify for the dividend received deduction otherwise
generally allowed to US corporate stockholders.

Subject to various limitations, Eligible US Holders who have DWT applied to their dividend
may be entitled to a credit against their US federal income tax liability. Under the Code, the limitation on foreign taxes eligible for credit is calculated separately with respect to separate classes of income. Dividends paid by AIB with respect to
AIB Ordinary or Preference shares or ADSs are foreign source passive income or, in the case of certain Eligible US holders, financial services income. Foreign tax credits allowable with respect to each class of income cannot
exceed the US Federal income tax otherwise payable with respect to such class of income. Special rules apply to qualified dividends subject to the 15% tax rate.

Dividend reinvestment program.Holders of Ordinary shares represented by ADSs, may elect to participate in a dividend reinvestment program provided by the Depositary, which under its BuyDirect program will
reinvest stockholdersAIB dividends by purchasing additional AIB stock in the open market. The US tax treatment, as set out in the preceding paragraphs, applies to dividends received by such holders.

Dividend reinvestment plan. When this plan, currently in suspension, is available, holders of Ordinary shares, other than holders of Ordinary
shares represented by ADSs, may elect to participate in the Dividend Reinvestment Plan and receive new Ordinary shares in lieu of cash dividends. A US holder who participates in the Dividend Reinvestment Plan will be treated as having received a
distribution for US Federal income tax purposes at the time of receipt of any Ordinary shares or cash distributed pursuant to the Plan provided such distribution does not exceed the current or accumulated earnings and profits of AIB (as determined
under US Federal income tax principles). The amount of the distribution will be equal to the sum of: (i) the amount of any cash dividend received (if any); (ii) the fair market value of the Ordinary shares on the date that they are
received; and (iii) the amount of any residual cash dividend entitlement that is carried forward to the next dividend payment date as a result of the provision that no fractional Ordinary shares are allotted under the Dividend Reinvestment
Plan. The tax basis of an Ordinary share received under the Dividend Reinvestment Plan will be equal to its fair market value on the date of receipt and the holding period of such a share will commence on the date of receipt.

Gain on disposition.Upon the sale, exchange or other disposition of Ordinary or Preference shares or ADSs, a US Holder will recognize a gain or
loss, if any, equal to the difference between the amount realized upon the sale, exchange, or disposition and the US Holders tax basis. Generally, a holders tax basis in Ordinary or Preference shares or ADSs will be the US Holders
cost. Such gain or loss will generally be capital gain or loss if the Ordinary or Preference shares or ADSs were held as a capital asset. Capital gains recognized by non-corporate US Holders after May 5, 2003 and before January 1, 2009, on
shares held longer than one year, are taxed at a maximum rate of 15%. Any gain will generally be treated as US source income.

Withholding tax.A holder of ADSs may, under certain circumstances, be subject to US backup withholding tax with respect to dividends paid on the ADSs or the proceeds of sale of the ADSs. For 2005, backup withholding tax is at a rate
of 28%. A US holder of ADSs is subject to backup withholding tax unless such holder: (i) is a corporation or comes within the certain other exempt categories and, when required, demonstrates this fact; or (ii) provides a correct taxpayer
identification number (TIN), certifying that such holder is not subject to backup withholding tax and otherwise complies with applicable requirements of the backup withholding tax rules. A non-US holder of ADSs must complete and provide
AIB or its agent with the applicable Form W-8 (Certificate of Foreign Status) certifying that such person is a foreign person exempt from backup withholding tax. Any amount withheld under the US backup withholding tax rules will be
creditable against the holders US federal income tax liability. Form W-8 does not exempt the non-US holder of ADSs from normal withholding tax on dividend distributions which are subject to a 28% or lower treaty withholding rate.



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A US holder of Ordinary or Preference shares may be exempted from or entitled to a refund of Irish
dividend withholding tax (see Irish Taxation - Withholding Tax on Dividends on page 62).

State and local taxes

Holders of Ordinary or Preference shares or ADSs may be liable for state and local taxes on distributions with respect to such shares or ADSs. Investors
are advised to consult their own tax advisors about state, local, and any other tax consequences to them of the purchase, ownership and disposition of Ordinary or Preference shares or ADSs.

United States and Irish Inheritance and Gift Taxation

Irish Capital Acquisitions Tax (CAT) applies to gifts and bequests of Irish situate assets. Irish CAT may also apply to non-Irish situate assets depending on the tax residence, ordinary residence and domicile positions of the
donor and the successor or donee. As such Irish CAT applies to gifts and bequests of Ordinary or Preference shares. It is not entirely clear whether ADSs representing Ordinary or Preference shares are regarded as non-Irish situate assets. As such
CAT may also apply to gifts and bequests of ADSs representing Ordinary or Preference shares regardless of the residence, ordinary residence or domicile of the donor and successor or donee. CAT is charged at a single rate of 20% above a tax-free
threshold. This tax-free threshold is determined by the amount of the current benefit and of previous benefits within the charge to CAT and the relationship between the donor and the successor or donee. Gifts and inheritances between spouses are not
subject to CAT.

There is no gift and inheritance tax convention between the United States and Ireland. Although an estate tax convention
between the two countries was ratified in 1951, estate duty was abolished in Ireland in 1975 and it is not clear whether the convention is applicable to Irish gift and inheritance taxes that replaced the former estate duty. Nonetheless, under the
Code any such inheritance tax payable in Ireland generally will be allowed as a credit, subject to certain limitations, against so much of the US Federal estate tax as is payable on the same property. Transfers of Ordinary or Preference shares or
ADSs upon death may be subject to US Federal estate tax subject to certain threshold exemptions.

US Federal gift tax may apply to gifts of
Ordinary or Preference shares or ADSs subject to certain thresholds and exemptions. No credit against Federal gift tax for Irish gift tax paid on the same property is allowable.



|Item 11. | Quantitative and qualitative disclosures about risk
|-------- | ---------------------------------------------------

Risk management

Risk-taking is inherent in providing financial services and AIB assumes a variety of risks in
its ordinary business activities. These include credit risk, market risk, liquidity risk and operational risk. The role of Risk Management is to ensure that AIB continues to take risk in a controlled way in order to enhance shareholder value.
AIBs risk management policies are designed to identify and analyze these risks, to set appropriate risk limits and to monitor these risks and limits continually. AIB continues to modify and enhance its risk management practices to reflect
changes in markets, products and evolving best practice.

Primary responsibility for risk management lies with line management. Within AIB,
line management is supported by a risk management function that sets standards, policies, limits and measurement methods and provides independent oversight through a Group Chief Risk Officer (CRO) with a direct reporting line to the
Group Chief Executive (CEO) and the Audit Committee of the Board. The Board of Directorsformally approves the overall strategy and the direction of the business on an annual basis. It regularly monitors the Groups financial
performance, reviews risk management activities and controls and has responsibility for approving the Groups risk appetite. The Group Executive Committee (GEC), comprising the Group CEO, Group Finance Director, Group Chief
Risk Officer, Group Director of Operations, Group Director of HR and the four Divisional Managing Directors, manages the strategic business risks of the Group. It sets the business strategy within which the risk management function operates and
oversees its activities.

The Group Risk Management Committee (RMC)is chaired by the Group CRO and has governance
responsibility for identifying, analyzing and monitoring exposure, adopting best practice standards and directing risk management activities across the Group. Its members include all of the members of the GEC along with the Group Head of Regulatory
Compliance and Business Ethics and the Group Internal Auditor. It is supported by the Group Credit Committee (GCC),the Group Operational Risk Management Committee (ORMCO)and the Group Market Risk Committee
(MRC).The Group Asset and Liability Management Committee (Group ALCO)is chaired by the Group Finance Director and has responsibility for the Groups capital, funding, and liquidity and structural balance
sheet activities. It is supported in this role by a Group Asset and Liability Management (ALM) function. In addition, each of the four operating divisions have ALM functions supporting their divisional ALCO. The Head of Group ALM is a
member of each divisional ALCO.

The Group CRO has responsibility for the Enterprise Risk Management framework, which includes:



| |  |  | Policies, instructions and guidelines
| | - |  | -------------------------------------



| |  |  | Identification of risk
| | - |  | ----------------------



| |  |  | Risk analysis
| | - |  | -------------



| |  |  | Risk measurement
| | - |  | ----------------



| |  |  | Credit and market risk limits
| | - |  | -----------------------------



| |  |  | Monitoring and control, and
| | - |  | ---------------------------



| |  |  | Reporting.
| | - |  | ----------

Each of the four operating divisions have
dedicated risk management functions, with Divisional CROs reporting directly to the Group CRO. In addition, the Group Chief Credit Officer (CCO), the Group Head of Operational Risk Management and the Group Head of Market Risk management
have functional responsibility for these risks at the centre and these also report directly to the Group CRO. Each Division has dedicated credit risk management and operational risk management functions. The Capital Markets division also



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has a dedicated Market Risk Management function. The Divisional CCO chairs the credit committee in each Division. Each Division has an ORMCO that reports
into the Group ORMCO.

Two other functions play very important roles in overseeing the risk control environment. These are Group Internal
Audit and Regulatory Compliance.

Group Internal Auditprovides reasonable assurance to the Board Audit Committee on the adequacy,
effectiveness and sustainability of the governance, risk management and control processes throughout the Group. A secondary objective is to influence the strengthening of governance, risk management and control processes through the sharing of best
practices.

In undertaking its responsibilities, Group Internal Audit adopts a risk-based approach, which translates into a comprehensive
program of work that provides an independent assessment of key governance, risk management and control processes. Included in its work are reviews of the self-assessments of operational risks and controls undertaken by the businesses. There is also
an ongoing review of risk identification standards and risk management methodologies which includes testing of the risk mitigators adopted by management.

Regulatory Complianceis an enterprise-wide function which identifies compliance obligations in each of our operating markets and provides advice and guidance to management and staff on addressing compliance
risks. Primary responsibility for compliance lies with line management. Compliance risks are associated with failures to comply with laws, regulations, rules, self-regulatory standards and the codes of conduct applicable to our business activities.
Such failures can give rise to legal or regulatory sanctions, material financial loss, or a loss of reputation to the bank. The regulatory compliance function also promotes the embedding of an ethical framework within the Groups businesses to
ensure that it operates with honesty, fairness and integrity in all its dealings with customers.

Regulatory Compliance supports management
in the development of appropriate policies and procedures that will ensure compliance with all our conduct of business obligations. Compliance teams are located in each Division to work closely with management to identify and control compliance
risks. The regulatory compliance function assesses and monitors the compliance risks faced by our businesses, and independently reports to the Audit Committee on the compliance framework operating across the Group, and on line managements
attention to compliance issues.

Credit risk

Credit risk is the risk that a customer or counterparty will be unable or unwilling to meet a commitment that it has entered into and that the pledged collateral does not cover AIBs claims. The credit risks in AIB arise primarily from
lending activities to customers but also from guarantees, derivatives and securities.

Credit management and control

Credit risk is managed and controlled throughout AIB on the basis of established credit processes and within a framework of credit policy and delegated
authorities based on skill and experience. Credit grading, scoring and monitoring systems accommodate the early identification and management of deterioration in loan quality. The credit management process is underpinned by an independent system of
credit review.

The Board determines the credit authority for the Group Credit Committee and approves the Groups key credit policies.
It also approves divisional credit authorities and reviews credit performance on a regular basis. The GCC considers and approves, within the parameters of the Group Large Exposure Policy, credit exposures which are in excess of divisional credit
authorities. The GCC comprises senior divisional and Group-based management and is chaired by the Group Chief Credit Officer.

The Group
CCO sets Groupwide standards for best practice including credit grading and scoring methodologies and exposure measurement. Divisional management approves divisional credit policy with the involvement and agreement of the risk management function.
Material divisional credit policies are referred to the Group RMC.

Credit risk on derivatives

The credit risk on derivative contracts is the risk that AIBs counterparty in the contract defaults prior to maturity at a time when AIB has a claim
on the counterparty under the contract. AIB would then have to replace the contract at the current market rate, which may result in a loss.

Derivatives are used by AIB to meet customer needs to reduce interest rate risk, currency risk and in some cases, credit risk as well as for proprietary trading purposes. Derivatives affect both credit and market risk exposures. The credit
exposure is treated in the same way as other types of credit exposure and is included in customer limits.



The total credit exposure consists partly of current exposure and partly of potential future exposure. The potential future exposure is an estimation,
which reflects possible changes in market values during the remaining lifetime of the individual contract. AIB uses a simulation tool to estimate possible changes in future market values and computes the credit exposure to a high level of
statistical significance.

Country risk

Country risk is the risk that circumstances can arise in which customers and other counterparties within a given country may be unable or precluded from fulfilling their obligations to AIB due to deterioration in economic or political
circumstances.

Country risk is managed by setting appropriate maximum risk limits to reflect each countrys overall credit
worthiness. Independent credit information from international sources, supported by visits to relevant countries, is used to determine the appropriate risk limits. Risks and limits are monitored on an ongoing basis.



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Settlement risk

Settlement risk is the risk of loss arising in situations where AIB has given irrevocable instructions for a transfer of a principal amount or security in exchange for receiving a payment or security from a
counterparty, which defaults before the transaction is completed.

The settlement risk on individual counterparties is measured as the full
value of the transactions on the day of settlement. It is controlled through settlement risk limits. Each counterparty is assessed in the credit process and clearing agents, correspondent banks and custodians are selected with a view to minimizing
settlement risk.

Rating methodologies

Internal rating
models, which comprise both grading and scoring systems, lie at the heart of credit management within AIB. They are used to differentiate between credits on the basis of estimated probability of default. In conjunction with the preparations for
Basel II, a significant review and upgrade of all material models has been carried out with a view to ensuring appropriate quality and standards are maintained in line with best practice.

In our consumer businesses, where there are large numbers of customers, credit decisions are largely informed by statistically based scoring systems.
Both application scoring for new customers and behavioural scoring for existing customers are used to measure risk and facilitate the management of these portfolios.

In our commercial and corporate businesses the grading systems utilize a combination of objective information (primarily financial data) and subjective assessments of non-financial risk factors. The combination of
expert lender judgement and statistical methodologies varies according to the size and nature of the portfolio and default experience.

Systems are in place to ensure that all of these models are continuously reviewed and validated.

The ratings influence the
management of individual loans. Special attention is paid to lower quality graded loans and, when appropriate, loans are transferred to specialist units to help avoid default and where in default to minimize loss.

Provisioning for impairment

AIB provides for impairment in a prompt
and conservative way across the credit portfolios. The rating models provide a systematic discipline in triggering the need for provisioning on a timely basis.

In January 2005, AIB introduced a new impairment provisioning methodology. This methodology included a number of changes in the approach used to estimate the loan impairment provisions and the accumulation and
examination of additional information relating to credit trends and other factors relevant to AIBs loan portfolio. The application of this revised methodology and the consideration of this additional information had the impact of reducing
AIBs estimate of the total credit provisions by 146 million at January 1, 2005. This has been treated as a transition adjustment to equity at January 1, 2005 under IFRS in accordance with IFRS 1.

Specific provisions arise when the recovery of a specific loan or group of loans is significantly in doubt. The amount of the specific provision will
reflect the financial position of the borrower and the net realizable value of any security held for the loan or group of loans. In practice, the specific provision is the difference between the present value of expected future cash flows for the
impaired loan(s) and the carrying / book value.

IBNR provisions are also maintained to cover loans which are impaired at the balance sheet
date, and while not specifically identified, are known from experience to be present in any portfolio of loans. IBNR impairment provisions can only be raised for incurred losses and will not be permitted for losses that are expected to happen as a
result of likely future events.

IBNR provisions are determined by reference to loss experience in our portfolios and to the credit
environment at balance sheet date. Whilst provisioning is an ongoing process, all AIB divisions formally review provision adequacy on a quarterly basis and determine the overall provision need. These provisions are in turn reviewed and approved on a
quarterly basis with ultimate Group levels being approved by the Group Audit Committee.

Credit performance measurement framework

AIB continues to refine its methodology of measuring the risk adjusted profitability of its credit business. Economic Value Added (EVA) is one of the primary
measures of performance. EVA represents the value added having deducted all costs, including expected loss and a charge for the economic capital required to support the facility.



The most important inputs into the determination of the expected loss and the
economic capital are the probability of default (PD), the loss given default (LGD) and the exposure at default (EAD). The rating grades produced by the rating models are translated into a PD, which is a key
parameter when measuring risk. LGD is measured taking into account amongst other things the security held by AIB. EAD for many products is equal to the outstanding exposure but for some products, such as credit lines and derivative contracts, the
EAD may be higher than the outstanding exposure. The methodology used in determining economic capital is in line with best practice.

This
framework is used to guide the pricing of credit risk and to influence the deployment of capital to maximize shareholder value.

Market risk

Market risk is the exposure to loss arising from adverse movements in interest rates, foreign exchange rates and equity prices. It
arises in trading activities as well as in the natural course of transacting business, for example in the provision of fixed rate loans or equity linked tracker bonds to customers.



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Risk management and control

The principal aims of AIBs market risk management activities are to limit the adverse impact of interest rate, exchange rate and equity price movements on profitability and shareholder value and to enhance
earnings within defined limits. Market risk management for AIB is centralized in Capital Markets Division. Interest rate, foreign exchange rate and equity risks incurred in retail and corporate banking activities are transferred into Global Treasury
where they are managed. The basic principle is that these risks are eliminated by matching the market risk characteristics of assets and liabilities. Global Treasury has the discretion to run a small mismatch, subject to strict limits and is also
responsible for AIBs investment and liquidity management activities.

Market risks are managed by setting limits on the amount of the
Groups capital that can be put at risk. These limits are based on risk measurement methodologies described below. The Board delegates authority to the Group CRO to allocate these limits on its behalf. The limits for Global Treasury are set in
accordance with its business strategy and are reviewed frequently. The Managing Director of Global Treasury allocates these limits to the various dealing desks who supplement these with more detailed limits and other risk reducing features such as
stop-loss rules. Within Global Treasury, there is a dedicated risk management team charged with the responsibility to ensure that the risk measurement methodologies used are appropriate for the risks being taken and that appropriate monitoring and
control procedures are in place. The Market Risk Committee (MRC) reviews market risk strategy. It approves policies and promotes best practice for measurement, monitoring and control.

Liquidity risk

The objective of liquidity management is to ensure
that, at all times, the Group holds sufficient funds to meet its contracted and contingent commitments to customers and counterparties, at an economic price. The Group achieves this through the maintenance of a stock of high quality liquid assets
and active involvement in the interbank market, supplemented by US dollar commercial paper and CD issuances together with a euro medium-term note program. The Groups stock of liquid assets is maintained at a level considered sufficient to meet
the withdrawal of deposits or calls on commitments in both normal and abnormal trading conditions. In all cases, net outflows are monitored on a daily basis and the required minimum stock of liquid assets can be increased if these outflows exceed
predetermined target levels. Global Treasury, through its wholesale treasury operations manages, on a global basis, the liquidity and funding requirements of the Group. Item 11 Risk Management, outlines the committee oversight
responsibility with respect to liquidity management.

Euro, Sterling, US dollar and Polish zloty represent the most important currencies to
AIB Group from a liquidity perspective. The Group has an established retail deposit base in Ireland, Britain and Poland which together with wholesale market products, fund asset growth. Although a significant element of these retail deposits are
contractually repayable on demand or at short notice, the Groups substantial customer base and geographic spread generally ensures that these current and deposit accounts represent a stable and predictable source of funds. The retail deposit
base in Ireland and the UK continues to grow strongly, though at a lower level than customer loan growth. The Groups deposit levels in Poland also continue to increase and overall deposit balances exceed loan assets.

The Group has sufficient liquidity to meet its current funding requirements and operates a funding strategy to meet future funding needs.

The Group also operates a liquidity contingency plan for critical situations. Counterparty ratings of AIB are as follows: Moodys long-term
Aa3 and short-term P-1; Fitch long-term AA minus and F1+ short-term; Standard and Poors long-term single A+ and A-1 short-term.

For information on levels of borrowing at the end of the period and its maturity and interest profile see Analysis of loans to customers by
maturity and interest rate sensitivity on page 76.

Measurement methods

There is no single risk measure that captures all aspects of market risk. AIB uses several risk measures including Value at Risk (VaR) models, sensitivity measures and stress testing.

VaR

The aim of VaR is to estimate the probable maximum loss in fair
value that could arise in one month from worst case movement in market rates. This is computed using statistical analysis of market rate movements setting a confidence level at 99%. This means that there is a one in one hundred chance
that the potential loss could be greater than that estimated from the data used. VaR figures are quoted using one-day and one-month holding periods.

AIBs market risk exposure is spread across a range of instruments, currencies and maturities. The VaR for a portfolio of market risk positions will not be the sum of the VaRs for each financial instrument
included in the portfolio. The VaR for a portfolio is lower because it is unlikely that the worst case scenario occurs in all instruments, currencies and maturities simultaneously.

Sensitivity measures

The limitations of VaR techniques are well
known to banks. They stem from the need to make assumptions about the spread of likely future price and rate movements. AIB supplements its VaR methodology with sensitivity measures. Dealers in Global Treasury know how much the value of their
positions could change for a given change in rates and/or prices. This sensitivity is monitored at desk and management level and reported on by the Global Treasury risk management unit. These measures can also be used to decide on hedging
activities. Decisions can be taken to close out positions when the level of sensitivity combined with the likelihood of a rate or price change exposes AIB to too high a loss in value.



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Stress testing

AIBs VaR and sensitivity measures provide estimates of probable maximum loss in normal market conditions. Stress tests are used to supplement these measures by estimating possible losses that may occur under
extreme market conditions. These measures feed into the estimate of economic capital for market risk.

Interest rate risk

Global Treasury manages the Groups exposure to interest rate risk. The risk is that changes in interest rates will have adverse effects on earnings
and on the value of AIBs assets and liabilities. This risk is managed by setting limits on the earnings at risk and the value at risk (VaR) from the open interest rate risk positions of the Group. Stop loss limits are also used to
close out loss making positions.

In managing interest rate risk, a distinction is made between trading and non-trading activities. Trading
activities are recorded in the trading book. Interest rate risk associated with AIBs retail, corporate and commercial activities is managed through the non-trading book. The reported interest rate VaR figures below represent the average, high,
low and year end probable maximum loss in respect of both trading and non-trading book positions held in Global Treasury.

Trading book

The interest rate trading book includes all securities and interest rate derivatives that are held for trading purposes in Global Treasury. These are revalued daily at
market prices (marked to market) and any changes in value are immediately recognized in income. During 2005, trading book interest rate risk was predominantly concentrated in the euro, sterling and the US dollar.

Non-trading book

AIBs non-trading book consists of its retail
and corporate deposit books, Global Treasurys cash books and the Groups investment portfolios and derivatives hedging interest rate risk within these portfolios. AIBs retail businesses have a substantial level of free current
accounts, equity and other interest-free or fixed rate liabilities and assets. Unless carefully managed, the net income from these funds will fluctuate directly with short-term interest rates. AIB manages this volatility by maintaining a portfolio
of instruments with interest rates fixed for several years. In designing this strategy, care is taken to ensure that the management of the portfolio is not inflexible as market conditions and customer requirements can bring about a need to alter the
portfolio. Group ALCO sets the framework and reviews the management of these activities.

AIBs net interest rate sensitivity as at
December 31, 2005 is illustrated in note 57 to the consolidated financial statements.

The following table illustrates the VaR figures for interest
rate risk for the years ended December 31, 2005 and 2004.



|                        |                    |      |                    |      |         |      |             |     
|----------------------- | ------------------ | ---- | ------------------ | ---- | ------- | ---- | ----------- | ----
|                        |                    | 2005 |                    | 2004
|                        | Trading            |      | Non-Trading        |      | Trading |      | Non-Trading
|                        | (Euro in millions) |      | (Euro in millions)
|Interest rate risk      |                    |      |                    |     
|1 month holding period: |                    |      |                    |      |         |      |             |     
|Average                 |                    | 8.6  |                    | 28.5 |         | 7.0  |             | 18.5
|High                    |                    | 14.5 |                    | 37.3 |         | 10.3 |             | 26.4
|Low                     |                    | 3.1  |                    | 18.6 |         | 4.0  |             | 11.8
|December 31             |                    | 9.1  |                    | 32.5 |         | 7.0  |             | 13.6
|1 day holding period:   |                    |      |                    |      |         |      |             |     
|Average                 |                    | 1.8  |                    | 6.1  |         | 1.6  |             | 4.1 
|High                    |                    | 3.1  |                    | 8.0  |         | 2.3  |             | 5.9 
|Low                     |                    | 0.7  |                    | 4.0  |         | 0.9  |             | 2.6 
|December 31             |                    | 1.9  |                    | 6.9  |         | 1.6  |             | 3.0 

Foreign exchange rate risk

AIB is exposed to foreign exchange rate risk through its international operations and through Global Treasury activities in foreign currencies.

Foreign exchange rate risk - structural

Structural foreign exchange rate risk arises from the
Groups non-trading net asset position in foreign currencies. Structural risk exposure arises almost entirely from the Groups net investments in its sterling, US dollar and Polish zloty-based subsidiaries. The Group prepares its
consolidated financial statements in euro. Accordingly, the consolidated balance sheet is affected by movements in the exchange rates between these currencies and the euro.

Because of the Groups diversified international operations, the currency profile of its capital may not necessarily match that of its assets and
risk weighted assets.

The Group does not maintain material non-trading open currency positions other than the structural risk exposure
discussed here.



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At December 31, 2005 and 2004, the Groups structural foreign exchange position was as follows:



|             |                    |                  |  |                 
|------------ | ------------------ | ---------------- |  | ----------------
|             |                    | December 31,2005 |  | December 31,2004
|             | (Euro in millions)
|US dollar    |                    | 1,627            |  | 1,520           
|Sterling     |                    | 1,029            |  | 1,312           
|Polish zloty |                    | 392              |  | 281             
|             |                    |                  |  |                 
|             |                    | 3,048            |  | 3,113           
|             |                    |                  |  |                 

This position indicates that a 10% movement in the value of the euro against these currencies at
December 31, 2005 would result in an amount to be taken to reserves of 305 million.

Foreign exchange rate risk  trading

Global Treasury manages AIBs exposure to foreign exchange rate risk arising from unhedged customer transactions and discretionary
trading. The risk is that adverse movements in foreign exchange rates will result in losses. This risk is managed by setting limits on the earnings at risk and the value at risk (VaR) from the open foreign exchange rate positions of the
Group. Stop loss limits are also used to close out loss making positions.

The following table sets out the VaR figures for trading foreign
exchange rate risk for the years ended December 31, 2005 and 2004.



|                                   |                    |      |  |     
|---------------------------------- | ------------------ | ---- |  | ----
|                                   |                    | 2005 |  | 2004
|                                   | (Euro in millions)
|Foreign exchange rate risk-trading |                    |      |  |     
|1 month holding period:            |                    |      |  |     
|Average                            |                    | 1.2  |  | 0.9 
|High                               |                    | 3.0  |  | 1.7 
|Low                                |                    | 0.5  |  | 0.4 
|December 31                        |                    | 0.9  |  | 1.3 
|1 day holding period:              |                    |      |  |     
|Average                            |                    | 0.2  |  | 0.2 
|High                               |                    | 0.6  |  | 0.4 
|Low                                |                    | 0.1  |  | 0.1 
|December 31                        |                    | 0.2  |  | 0.3 
|                                   |                    |      |  |     



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Equity risk

Global Treasury manages the equity risk arising on its convertible bond portfolio and from stock market linked investment products (tracker bonds) sold to customers. Goodbody Stockbrokers manage the equity risk in its Principal Trading
Account. The risk is that adverse movements in share, share index or equity option prices will result in losses for the Group. This risk is managed by setting limits on the earnings at risk and the value at risk (VaR) from the open
equity positions of the Group. Stop loss limits are also used to close out loss making positions. The table below sets out the VaR figures for equity risk for the years ended December 31, 2005 and 2004.



|                        |                    |         |      |     
|----------------------- | ------------------ | ------- | ---- | ----
|                        |                    | Trading
|                        | 2005               |         | 2004
|                        | (Euro in millions)
|Equity risk             |                    |        
|1 month holding period: |                    |         |      |     
|Average                 |                    | 13.6    |      | 20.7
|High                    |                    | 18.5    |      | 26.2
|Low                     |                    | 11.1    |      | 14.6
|31 December             |                    | 13.6    |      | 18.4
|1 day holding period:   |                    |         |      |     
|Average                 |                    | 2.9     |      | 4.6 
|High                    |                    | 4.0     |      | 5.9 
|Low                     |                    | 1.8     |      | 3.3 
|31 December             |                    | 2.9     |      | 4.1 
|                        |                    |         |      |     

Off-balance sheet financial instruments

AIB uses off-balance sheet financial instruments to service customer requirements, to manage the Groups market risk exposures and for trading
purposes.

Credit commitments

Contingent liabilities and commitments to extend credit are outlined in note 48 to the consolidated financial statements. The Groups maximum exposure to credit loss in the event of non-performance by the other party, where all
counterclaims, collateral or security prove valueless, is represented by the contractual amounts of these contracts.

The following table
shows the nominal or contract amounts and the risk weighted credit equivalent of contingent liabilities and commitments at December 31, 2005 and 2004.



|                                                     |                    |                   |                    |                   |                |        |                    |       
|---------------------------------------------------- | ------------------ | ----------------- | ------------------ | ----------------- | -------------- | ------ | ------------------ | ------
|                                                     |                    | December 31, 2005 |                    | December 31, 2004
|                                                     | Contractamount     |                   | Riskweightedamount |                   | Contractamount |        | Riskweightedamount
|                                                     | (Euro in millions)
|Contingent liabilities                               |                    |                   |                    |                   |                |        |                    |       
|Acceptances(1)                                       |                    |                  |                    |                  |                | 12     |                    | 12    
|Endorsements                                         |                    |                  |                    |                  |                | 2      |                    | 2     
|Guarantees and assets pledged as collateral security |                    | 7,157             |                    | 7,142             |                | 5,394  |                    | 5,287 
|Other contingent liabilities                         |                    | 1,396             |                    | 982               |                | 830    |                    | 420   
|                                                     |                    |                   |                    |                   |                |        |                    |       
|                                                     |                    | 8,553             |                    | 8,124             |                | 6,238  |                    | 5,721 
|                                                     |                    |                   |                    |                   |                |        |                    |       
|Commitments                                          |                    |                   |                    |                   |                |        |                    |       
|Other commitments                                    |                    | 19,558            |                    | 6,420             |                | 16,127 |                    | 5,119 
|                                                     |                    |                   |                    |                   |                |        |                    |       
|                                                     |                    | 28,111            |                    | 14,544            |                | 22,365 |                    | 10,840
|                                                     |                    |                   |                    |                   |                |        |                    |       



|(1) | On transition to IFRS, at January 1, 2005, IAS 39 requires the recognition of a liability for acceptances from the date of acceptance. A corresponding asset due
from the originator is also recognized. Under Irish GAAP, acceptances were accounted for on a net basis and shown as a contingent liability.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The Group uses the same credit control and risk management policies in undertaking all off-balance sheet
commitments as it does for on balance sheet lending including counterparty credit approval, limit setting and monitoring procedures. In addition, in relation to derivative instruments, the Groups exposure to market risk is controlled within
the risk limits in the Groups Interest Rate Risk and Foreign Exchange Risk Policies and is further constrained by the risk parameters incorporated in the Groups Derivatives Policy as approved by the Board.

Derivative financial instruments

Derivative
instruments are contractual agreements between parties whose value reflects movements in an underlying interest rate, foreign exchange rate, equity price or index. While notional principal amounts are used to express the volume of these
transactions, the amounts subject to credit risk are much lower. This is because most derivatives involve payments based on the net differences between the rates expressed in the contracts and other market rates.

The Group is exposed to interest rate risk when assets and liabilities mature or reprice at different times or in differing amounts. Interest rate
derivatives are used to manage interest rate risk in a cost-efficient manner. Similarly, foreign exchange and equity derivatives are used to manage the Groups exposure to foreign exchange and equity risk, as required.

The values of derivative instruments can rise and fall as market rates change. Where they are used to hedge on-balance sheet assets or liabilities, the
changes in value are generally offset by the value changes in the hedged items.

The Group uses derivative transactions to hedge interest
rate risk and the accounting treatment of these transactions is set out in the Accounting policies section. The Group uses both fair value hedges and cash flow hedges to achieve its hedge objective. Derivatives are classified as fair value hedges
where the hedging objective is to eliminate the risk of changes in fair value, arising from interest rate fluctuations of fixed rate assets or liabilities.

Derivatives are classified as cash flow hedges where the hedging objective is to eliminate the risk of interest rate fluctuations over the hedging period for variable rate loan portfolios.

The following is a brief description of the derivative instruments that account for the major part of the Groups derivative activities:

Interest rate swapsare agreements between two parties to exchange fixed and floating rate interest by means of periodic
payments based upon notional principal amounts and interest rates defined in the contract.

The Group uses interest rate swaps to manage
the impact on income and shareholder value of interest rate changes on variable and fixed rate assets. In addition, swaps are used to hedge the Groups funding costs.

Currency swapsare interest rate swaps where one or both of the legs of the swap is payable in a different currency. They are used by both
customers and Global Treasury to convert fixed rate assets or liabilities to floating rate or vice versa, or to change the maturity or currency profile of underlying assets and liabilities, as required.

Forward rate agreementsare individually negotiated contracts under which an interest rate is agreed for a notional principal amount covering a
specified period in the future. At the settlement date, if interest rates for the future period are higher than the agreed rate, the seller pays the buyer the difference between the contract rate and the rate prevailing. If interest rates are lower,
the buyer pays the seller. These contracts are used by customers to fix the rates for future short-term borrowing or deposits.

Financial futuresare exchange traded contracts to buy or sell a standardized amount of the underlying item at an agreed price on a set date. Interest rate futures contracts are available in all of the major currencies. Foreign
currency and equity index futures are also available. Financial futures are used to hedge the Groups exposures arising from the sale of forward rate agreements or guaranteed equity products. They are also used to manage the interest rate risks
arising in the Groups debt securities portfolio.

Optionsare contracts that give the purchaser the right, but not the
obligation, to buy or sell an underlying asset e.g. bond, foreign currency, or equity index, at a certain price on or before an agreed date. These provide more flexible means of managing exposure to changes in interest rates, exchange rates and
equity index levels. Foreign exchange rate options are used to hedge income and expenses arising from non-euro denominated assets and liabilities and to manage the impact of exchange rates on the reported euro value of non-euro earnings. Foreign
exchange rate options are also used to hedge exposures arising from customer transactions.

Interest rate caps/floorsare series of
options that give the buyer the ability to fix the maximum or minimum rate of interest. A combination of an interest rate cap and floor is known as an interest rate collar.

Forward foreign exchange contractsare agreements to buy or sell a specified quantity of foreign currency, usually on a specified date, at an
agreed exchange rate. These contracts are used by customers to fix the exchange rates for future foreign exchange transactions. They are also used by the Group to hedge non-euro income and expenses.



Credit derivativesare contracts, the value of which are determined by
the credit worthiness of some underlying borrower or borrowers. They are used in the industry to increase (take a position in) or decrease (hedge) an exposure to credit risk. AIB currently makes little use of credit derivatives.



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The table below shows the notional principal amount and gross replacement cost for trading and
non-trading interest rate, exchange rate and equity contracts at December 31, 2005 and 2004. Further detailed information on derivatives is provided in Note 49 of the consolidated financial statements.



|                        |  |                         |  |                      |  |                         |  |                     
|----------------------- |  | ----------------------- |  | -------------------- |  | ----------------------- |  | --------------------
|                        |  | December 31, 2005       |  | December 31, 2004   
|                        |  | Notionalprincipalamount |  | Grossreplacementcost |  | Notionalprincipalamount |  | Grossreplacementcost
|                        |  | (Euro in millions)     
|Interest rate contracts |  |                         |  |                      |  |                         |  |                     
|Trading                 |  | 126,885                 |  | 685                  |  | 109,372                 |  | 765                 
|Non-trading             |  | 51,441                  |  | 461                  |  | 31,695                  |  | 294                 
|                        |  |                         |  |                      |  |                         |  |                     
|                        |  | 178,326                 |  | 1,146                |  | 141,067                 |  | 1,059               
|                        |  |                         |  |                      |  |                         |  |                     
|Exchange rate contracts |  |                         |  |                      |  |                         |  |                     
|Trading                 |  | 19,799                  |  | 238                  |  | 15,870                  |  | 599                 
|Non-trading             |  |                        |  |                     |  |                        |  |                    
|                        |  |                         |  |                      |  |                         |  |                     
|                        |  | 19,799                  |  | 238                  |  | 15,870                  |  | 599                 
|                        |  |                         |  |                      |  |                         |  |                     
|Equity contracts        |  |                         |  |                      |  |                         |  |                     
|Trading                 |  | 4,386                   |  | 253                  |  | 3,575                   |  | 112                 
|Non-trading             |  |                        |  |                     |  |                        |  |                    
|                        |  |                         |  |                      |  |                         |  |                     
|                        |  | 4,386                   |  | 253                  |  | 3,575                   |  | 112                 
|                        |  |                         |  |                      |  |                         |  |                     

Operational risk

Within AIB, operational risk is defined as the exposure to loss from inadequate or failed internal processes, people and systems or from external events. It is the risk of direct or indirect loss, or damaged
reputation, due to deficiencies or errors in the Groups internal operations which may be attributable to employees, the organisation, control routines, processes or technology, or due to external events and relations. Operational risks are
inherent in all activities within the organisation, in outsourced activities and in all interaction with external parties.

Strong internal
control and quality management, consisting of a risk management framework, leadership and skilled personnel, is the key to successful operational risk management. Each business area is primarily responsible for managing its own operational risks.
Risk management develops and maintains the framework for identifying, monitoring and controlling operational risks and supports the business in implementing the framework and raising awareness of operational risks.

An element of AIBs operational risk management framework is ongoing monitoring through self-assessment of control deficiencies and weaknesses, the
tracking of incidents and loss events and the use of a structured lessons learned process to ensure that, once identified, control deficiencies are communicated and remedied across the Group.

The role of Group ORMCO is to co-ordinate operational risk management activities across the Group through setting policy, monitoring compliance and
promoting best practice disciplines.

Loan portfolio

AIB Groups loan portfolio comprises loans (including overdrafts) and installment credit
and finance lease receivables.

The overdraft provides a demand credit facility combined with a checking account. Borrowings occur when the
customers drawings take the checking account into debit. The balance may therefore fluctuate with the requirements of the customer. Although overdrafts are contractually repayable on demand (unless a fixed term has been agreed), provided the
account is deemed to be satisfactory, full repayment is not generally demanded without notice.

An important factor influencing the quality
of AIB Groups earnings is the diversification of its credit portfolio within each of its geographic markets (Ireland, United Kingdom, United States of America and Poland) by spread of locations, industry classification and individual customer.

Apart from the Construction and Property sector in the Republic of Ireland and United Kingdom which accounted for 17.3% and 10.3%
respectively of Group advances as at December 31, 2005, no one industry in any geographic market accounts for more than 10% of AIB Groups total loan portfolio.

The Construction and Property loans are well diversified by sub-sector, loan type, location and borrower. This portfolio includes loans for property investment which is comprised of loans for investment in commercial,
retail, office and residential property (the majority of these loans are underpinned by lessee cashflow as well as collateral of the investment property), residential development and commercial development. A small percentage comprises loans to the
contracting sub-sector.

This is the first set of financial statements prepared under International Financial Reporting Standards
(IFRS). On implementation of IFRS the Groups loans and receivables to customers at December 31, 2004 of 64,812 million increased to 65,668 million (at January 1, 2005). The largest part of this increase
(919 million) relates to assets previously classified as debt securities (unquoted securities) now classified as loans and receivables to customers.



72



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The following table shows AIB Groups total loan portfolio by category of loan at December 31,
2005, 2004, 2003, 2002, and 2001.



|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|-------------------------------- |  | ------------------ | - |  | ------------ | - |  | ------------ | - |  | ------------ | - |  | ------------ | -
|                                 |  | December 31,       |  
|                                 |  | 2005IFRS           |   |  | 2004 IR GAAP |   |  | 2003 IR GAAP |   |  | 2002 IR GAAP |   |  | 2001 IR GAAP |  
|                                 |  | (Euro in millions) |  
|IRELAND                          |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|Agriculture                      |  | 1,646              |   |  | 1,599        |   |  | 1,372        |   |  | 1,393        |   |  | 1,344        |  
|Energy                           |  | 733                |   |  | 407          |   |  | 336          |   |  | 539          |   |  | 386          |  
|Manufacturing                    |  | 2,585              |   |  | 2,270        |   |  | 1,941        |   |  | 2,171        |   |  | 2,452        |  
|Construction and property        |  | 14,863             |   |  | 10,059       |   |  | 6,716        |   |  | 4,796        |   |  | 4,062        |  
|Distribution                     |  | 6,551              |   |  | 4,899        |   |  | 4,039        |   |  | 3,741        |   |  | 3,351        |  
|Transport                        |  | 711                |   |  | 548          |   |  | 490          |   |  | 505          |   |  | 544          |  
|Financial                        |  | 938                |   |  | 404          |   |  | 380          |   |  | 461          |   |  | 556          |  
|Services                         |  | 3,301              |   |  | 2,987        |   |  | 2,443        |   |  | 1,980        |   |  | 1,600        |  
|Personal - Residential mortgages |  | 17,054             |   |  | 13,236       |   |  | 10,271       |   |  | 7,725        |   |  | 5,930        |  
|- Overdraft/installment          |  | 5,501              |   |  | 4,322        |   |  | 3,412        |   |  | 3,024        |   |  | 2,716        |  
|Lease financing                  |  | 1,099              |   |  | 1,276        |   |  | 1,375        |   |  | 1,406        |   |  | 1,364        |  
|Guaranteed by Irish Government   |  | 2                  |   |  |             |   |  | 1            |   |  | 11           |   |  |             |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|                                 |  | 54,984             |   |  | 42,007       |   |  | 32,776       |   |  | 27,752       |   |  | 24,305       |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|UNITED KINGDOM                   |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|Agriculture                      |  | 163                |   |  | 181          |   |  | 143          |   |  | 162          |   |  | 134          |  
|Energy                           |  | 216                |   |  | 232          |   |  | 157          |   |  | 73           |   |  | 20           |  
|Manufacturing                    |  | 1,366              |   |  | 1,313        |   |  | 1,166        |   |  | 989          |   |  | 1,190        |  
|Construction and property        |  | 8,819              |   |  | 5,769        |   |  | 4,008        |   |  | 2,860        |   |  | 2,156        |  
|Distribution                     |  | 2,751              |   |  | 2,377        |   |  | 1,850        |   |  | 1,588        |   |  | 1,423        |  
|Transport                        |  | 489                |   |  | 345          |   |  | 268          |   |  | 264          |   |  | 308          |  
|Financial                        |  | 1,063              |   |  | 936          |   |  | 856          |   |  | 781          |   |  | 745          |  
|Services                         |  | 4,384              |   |  | 3,166        |   |  | 2,223        |   |  | 2,261        |   |  | 1,805        |  
|Personal - Residential mortgages |  | 3,802              |   |  | 3,090        |   |  | 2,499        |   |  | 2,151        |   |  | 1,965        |  
|- Overdraft/installment          |  | 1,273              |   |  | 1,112        |   |  | 1,030        |   |  | 1,007        |   |  | 922          |  
|Lease financing                  |  | 98                 |   |  | 24           |   |  | 22           |   |  |             |   |  |             |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|                                 |  | 24,424             |   |  | 18,545       |   |  | 14,222       |   |  | 12,136       |   |  | 10,668       |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|UNITED STATES OF AMERICA(1)      |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|Energy                           |  | 316                |   |  | 121          |   |  | 79           |   |  |             |   |  |             |  
|Manufacturing                    |  | 200                |   |  | 124          |   |  | 76           |   |  |             |   |  |             |  
|Construction and property        |  | 620                |   |  | 191          |   |  | 94           |   |  |             |   |  |             |  
|Distribution                     |  | 103                |   |  | 96           |   |  | 58           |   |  |             |   |  |             |  
|Transport                        |  | 12                 |   |  | 13           |   |  | 5            |   |  |             |   |  |             |  
|Financial                        |  | 439                |   |  | 123          |   |  | 51           |   |  |             |   |  |             |  
|Services                         |  | 810                |   |  | 726          |   |  | 692          |   |  |             |   |  |             |  
|Personal - Residential mortgages |  |                   |   |  |             |   |  |             |   |  |             |   |  |             |  
|- Overdraft/installment          |  |                   |   |  | 3            |   |  | 2            |   |  |             |   |  |             |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|                                 |  | 2,500              |   |  | 1,397        |   |  | 1,057        |   |  | 10,916       |   |  | 13,602       |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|POLAND                           |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|Agriculture                      |  | 147                |   |  | 148          |   |  | 135          |   |  | 154          |   |  | 169          |  
|Energy                           |  | 202                |   |  | 236          |   |  | 200          |   |  | 219          |   |  | 263          |  
|Manufacturing                    |  | 704                |   |  | 764          |   |  | 720          |   |  | 871          |   |  | 1,018        |  
|Construction and property        |  | 531                |   |  | 365          |   |  | 270          |   |  | 221          |   |  | 230          |  
|Distribution                     |  | 462                |   |  | 516          |   |  | 439          |   |  | 600          |   |  | 730          |  
|Transport                        |  | 67                 |   |  | 81           |   |  | 85           |   |  | 113          |   |  | 102          |  
|Financial                        |  | 77                 |   |  | 91           |   |  | 86           |   |  | 238          |   |  | 196          |  
|Services                         |  | 384                |   |  | 281          |   |  | 287          |   |  | 318          |   |  | 275          |  
|Personal - Residential mortgages |  | 540                |   |  | 477          |   |  | 388          |   |  | 319          |   |  | 181          |  
|- Overdraft/installment          |  | 316                |   |  | 231          |   |  | 186          |   |  | 239          |   |  | 333          |  
|Lease financing                  |  | 418                |   |  | 341          |   |  | 248          |   |  |             |   |  |             |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|                                 |  | 3,848              |   |  | 3,531        |   |  | 3,044        |   |  | 3,292        |   |  | 3,497        |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|REST OF THE WORLD                |  | 293                |   |  | 119          |   |  | 15           |   |  | 227          |   |  | 230          |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|Total loans to customers         |  | 86,049             |   |  | 65,599       |   |  | 51,114       |   |  | 54,323       |   |  | 52,302       |  
|Unearned income                  |  | (143               | ) |  | (129         | ) |  | (115         | ) |  | (242         | ) |  | (311         | )
|Allowance for loan losses        |  | (674               | ) |  | (658         | ) |  | (662         | ) |  | (860         | ) |  | (1,007       | )
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  
|                                 |  | 85,232             |   |  | 64,812       |   |  | 50,337       |   |  | 53,221       |   |  | 50,984       |  
|                                 |  |                    |   |  |              |   |  |              |   |  |              |   |  |              |  



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##### Table of Contents

|(1) | Following the divesting of Allfirst in Quarter 1 2003 AIB Groups remaining USA advances
are categorized sectorally on a basis consistent with the rest of the Group. For reference, details of the Groups USA advances, as previously reported are included below.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                         |  |                    |  |             
|------------------------ |  | ------------------ |  | ------------
|                         |  | December 31,      
|                         |  | 2002 IR GAAP       |  | 2001 IR GAAP
|                         |  | (Euro in millions)
|UNITED STATES OF AMERICA |  |                    |  |             
|Commercial               |  | 4,416              |  | 5,606       
|Real estate              |  | 2,582              |  | 2,988       
|Residential mortgages    |  | 374                |  | 550         
|Retail                   |  | 2,693              |  | 3,206       
|Bankcard                 |  | 12                 |  | 17          
|Leases receivable        |  | 839                |  | 1,235       
|                         |  |                    |  |             
|                         |  | 10,916             |  | 13,602      
|                         |  |                    |  |             



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##### Table of Contents

The following table shows the percentages of total loans by each category of loan at December 31,
2005, 2004, 2003, 2002 and 2001.



|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|-------------------------------- |  | ------------ | - |  | ----------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                                 |  | December 31, |  
|                                 |  | 2005IFRS     |   |  | 2004IR GAAP |   |  | 2003IR GAAP |   |  | 2002IR GAAP |   |  | 2001IR GAAP |  
|IRELAND                          |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|Agriculture                      |  | 1.9          | % |  | 2.4         | % |  | 2.7         | % |  | 2.6         | % |  | 2.6         | %
|Energy                           |  | 0.9          |   |  | 0.6         |   |  | 0.7         |   |  | 1.0         |   |  | 0.7         |  
|Manufacturing                    |  | 3.0          |   |  | 3.5         |   |  | 3.8         |   |  | 4.1         |   |  | 4.7         |  
|Construction and property        |  | 17.3         |   |  | 15.3        |   |  | 13.1        |   |  | 8.8         |   |  | 7.8         |  
|Distribution                     |  | 7.6          |   |  | 7.5         |   |  | 7.9         |   |  | 6.9         |   |  | 6.4         |  
|Transport                        |  | 0.8          |   |  | 0.8         |   |  | 1.0         |   |  | 0.9         |   |  | 1.0         |  
|Financial                        |  | 1.1          |   |  | 0.6         |   |  | 0.7         |   |  | 0.8         |   |  | 1.1         |  
|Services                         |  | 3.8          |   |  | 4.6         |   |  | 4.8         |   |  | 3.6         |   |  | 3.1         |  
|Personal - Residential mortgages |  | 19.8         |   |  | 20.2        |   |  | 20.1        |   |  | 14.2        |   |  | 11.3        |  
|- Overdraft/installment          |  | 6.4          |   |  | 6.6         |   |  | 6.6         |   |  | 5.6         |   |  | 5.2         |  
|Lease financing                  |  | 1.3          |   |  | 1.9         |   |  | 2.7         |   |  | 2.6         |   |  | 2.6         |  
|Guaranteed by Irish Government   |  |             |   |  |            |   |  |            |   |  |            |   |  |            |  
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                 |  | 63.9         | % |  | 64.0        | % |  | 64.1        | % |  | 51.1        | % |  | 46.5        | %
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|UNITED KINGDOM                   |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|Agriculture                      |  | 0.2          | % |  | 0.3         | % |  | 0.3         | % |  | 0.3         | % |  | 0.3         | %
|Energy                           |  | 0.3          |   |  | 0.4         |   |  | 0.3         |   |  | 0.1         |   |  |            |  
|Manufacturing                    |  | 1.6          |   |  | 2.0         |   |  | 2.3         |   |  | 1.8         |   |  | 2.3         |  
|Construction and property        |  | 10.3         |   |  | 8.8         |   |  | 7.8         |   |  | 5.3         |   |  | 4.1         |  
|Distribution                     |  | 3.2          |   |  | 3.7         |   |  | 3.7         |   |  | 2.9         |   |  | 2.7         |  
|Transport                        |  | 0.6          |   |  | 0.5         |   |  | 0.5         |   |  | 0.5         |   |  | 0.6         |  
|Financial                        |  | 1.2          |   |  | 1.4         |   |  | 1.7         |   |  | 1.4         |   |  | 1.4         |  
|Services                         |  | 5.0          |   |  | 4.8         |   |  | 4.3         |   |  | 4.2         |   |  | 3.4         |  
|Personal - Residential mortgages |  | 4.4          |   |  | 4.7         |   |  | 4.9         |   |  | 4.0         |   |  | 3.8         |  
|- Overdraft/installment          |  | 1.5          |   |  | 1.7         |   |  | 2.0         |   |  | 1.9         |   |  | 1.8         |  
|Lease Financing                  |  | 0.1          |   |  |            |   |  |            |   |  |            |   |  |            |  
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                 |  | 28.4         | % |  | 28.3        | % |  | 27.8        | % |  | 22.4        | % |  | 20.4        | %
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|UNITED STATES OF AMERICA         |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|Energy                           |  | 0.4          |   |  | 0.2         |   |  | 0.2         |   |  |            |   |  |            |  
|Manufacturing                    |  | 0.2          |   |  | 0.2         |   |  | 0.1         |   |  |            |   |  |            |  
|Construction and property        |  | 0.7          |   |  | 0.3         |   |  | 0.2         |   |  |            |   |  |            |  
|Distribution                     |  | 0.1          |   |  | 0.1         |   |  | 0.1         |   |  |            |   |  |            |  
|Transport                        |  |             |   |  |            |   |  |            |   |  |            |   |  |            |  
|Financial                        |  | 0.5          |   |  | 0.2         |   |  | 0.1         |   |  |            |   |  |            |  
|Services                         |  | 1.0          |   |  | 1.1         |   |  | 1.4         |   |  |            |   |  |            |  
|Personal - Residential mortgages |  |             |   |  |            |   |  |            |   |  |            |   |  |            |  
|- Overdraft/installment          |  |             |   |  |            |   |  |            |   |  |            |   |  |            |  
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                 |  | 2.9          | % |  | 2.1         | % |  | 2.1         | % |  | 20.1        | % |  | 26.0        | %
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|POLAND                           |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|Agriculture                      |  | 0.2          | % |  | 0.2         | % |  | 0.3         | % |  | 0.3         | % |  | 0.3         | %
|Energy                           |  | 0.2          |   |  | 0.4         |   |  | 0.4         |   |  | 0.4         |   |  | 0.5         |  
|Manufacturing                    |  | 0.8          |   |  | 1.2         |   |  | 1.4         |   |  | 1.6         |   |  | 2.0         |  
|Construction and Property        |  | 0.6          |   |  | 0.6         |   |  | 0.5         |   |  | 0.4         |   |  | 0.4         |  
|Distribution                     |  | 0.5          |   |  | 0.8         |   |  | 0.8         |   |  | 1.1         |   |  | 1.4         |  
|Transport                        |  | 0.1          |   |  | 0.1         |   |  | 0.2         |   |  | 0.2         |   |  | 0.2         |  
|Financial                        |  | 0.1          |   |  | 0.1         |   |  | 0.2         |   |  | 0.4         |   |  | 0.4         |  
|Services                         |  | 0.5          |   |  | 0.4         |   |  | 0.5         |   |  | 0.6         |   |  | 0.5         |  
|Personal - Residential mortgages |  | 0.6          |   |  | 0.7         |   |  | 0.8         |   |  | 0.6         |   |  | 0.4         |  
|- Overdraft/installment          |  | 0.4          |   |  | 0.4         |   |  | 0.4         |   |  | 0.4         |   |  | 0.6         |  
|Lease financing                  |  | 0.5          |   |  | 0.5         |   |  | 0.5         |   |  |            |   |  |            |  
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                 |  | 4.5          | % |  | 5.4         | % |  | 6.0         | % |  | 6.0         | % |  | 6.7         | %
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|REST OF THE WORLD                |  | 0.3          | % |  | 0.2         | % |  |            |   |  | 0.4         | % |  | 0.4         | %
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  
|Total loans to customers         |  | 100.0        | % |  | 100.0       | % |  | 100.0       | % |  | 100.0       | % |  | 100.0       | %
|                                 |  |              |   |  |             |   |  |             |   |  |             |   |  |             |  



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##### Table of Contents

Analysis of loans to customers by maturity and interest rate sensitivity

The following table analyzes loans to customers by maturity and interest rate sensitivity. Overdrafts, which in the aggregate represent approximately 5%
of the portfolio, are classified as repayable within one year. Approximately 10% of AIB Groups loan portfolio is provided on a fixed rate basis. Fixed rate loans are defined as those loans for which the interest rate is fixed for the full term
of the loan. The interest rate risk exposure is managed by Global Treasury within agreed policy parameters.



|                         |  |                    |  |                               |  |              |  |       
|------------------------ |  | ------------------ |  | ----------------------------- |  | ------------ |  | ------
|                         |  | December 31, 2005 
|                         |  | Within1 year       |  | After 1 yearbut within 5years |  | After 5years |  | Total 
|                         |  | (Euro in millions)
|Ireland                  |  | 19,131             |  | 13,925                        |  | 21,928       |  | 54,984
|United Kingdom           |  | 10,271             |  | 5,120                         |  | 9,033        |  | 24,424
|United States of America |  | 336                |  | 1,605                         |  | 559          |  | 2,500 
|Poland                   |  | 1,518              |  | 1,447                         |  | 883          |  | 3,848 
|Rest of the World        |  | 21                 |  | 75                            |  | 197          |  | 293   
|                         |  |                    |  |                               |  |              |  |       
|Total loans by maturity  |  | 31,277             |  | 22,172                        |  | 32,600       |  | 86,049
|                         |  |                    |  |                               |  |              |  |       
|                         |  |                    |  |                              
|                         |  |                    |  | Fixed rate                    |  | Variablerate |  | Total 
|                         |  |                    |  | (Euro in millions)           
|Ireland                  |  |                    |  | 4,482                         |  | 50,502       |  | 54,984
|United Kingdom           |  |                    |  | 2,182                         |  | 22,242       |  | 24,424
|United States of America |  |                    |  | 330                           |  | 2,170        |  | 2,500 
|Poland                   |  |                    |  | 270                           |  | 3,578        |  | 3,848 
|Rest of the World        |  |                    |  |                              |  | 293          |  | 293   
|                         |  |                    |  |                               |  |              |  |       
|                         |  |                    |  | 7,264                         |  | 78,785       |  | 86,049
|                         |  |                    |  |                               |  |              |  |       

Provision and allowance for loan losses

Under IAS 39, there are two types of provisions, (a) Specific and (b) Incurred but not reported (IBNR) i.e. collective provisions
for earning loans.

A provision for loan losses is taken as a charge to income and added to the allowance for loan losses to bring the
allowance to an appropriate level having regard to both specific and general factors. Any subsequent charge off (write-off) is charged against the allowance.

A specific provision is made against problem loans when, in the judgement of management, the estimated repayment realizable from the obligor, including the value of any security available, is likely to fall short of
the amount of principal and interest outstanding on the obligors loan or overdraft account. The amount of the specific provision made in AIB Groups consolidated financial statements is intended to cover the difference between the balance
outstanding on impaired loans and estimated recoveries (i.e. the present value of future cash flows).

When a loan has been subjected to a
specific provision and the prospects for recovery do not improve, a point will come when it may be concluded that there is no realistic prospect of recovery. When that point is reached, the amount of the loan which is considered to be beyond
prospect of recovery is charged off. The management process for the identification of loans requiring provision is underpinned by independent tiers of review. Credit quality and loan loss provisioning are independently monitored by head office
personnel on a regular basis. A group wide system for rating advances according to agreed credit criteria exists with an important objective being the timely identification of vulnerable loans so that remedial action can be taken at the earliest
opportunity. Rating is fundamental to the determination of provisioning in AIB Group; it triggers the process which results in the creation of a specific provision on individual loans where there is doubt on recoverability.

IBNR provisions are maintained to cover loans which are impaired at balance sheet date and, while not specifically identified, are known from experience
to be present in any portfolio of loans. IBNR provisions can only be raised for incurred losses and will not be permitted for losses that are expected to happen as a result of likely future events. IBNR provisions are determined by reference to loss
experience in our portfolios and to the credit environment at balance sheet date.

All AIB divisions assess and approve their provisions
and provision adequacy on a quarterly basis. These provisions are in turn reviewed and approved by the AIB Group Credit Committee on a quarterly basis with ultimate Group levels being approved by the Group Audit Committee and the Group Board of
Directors.



76



---

##### Table of Contents

Movements in the allowance for loan losses



|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|----------------------------------------------------------------- |  | ------------------ | - |  | ----------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                                                                  |  | December 31,       |  
|                                                                  |  | 2005IFRS           |   |  | 2004IR GAAP |   |  | 2003IR GAAP |   |  | 2002IR GAAP |   |  | 2001IR GAAP |  
|                                                                  |  | (Euro in millions) |  
|Total allowance at beginning of period(1)                         |  | 760                |   |  | 664         |   |  | 862         |   |  | 1,009       |   |  | 872         |  
|IFRS transition adjustment(1)                                     |  | (146               | ) |  |            |   |  |            |   |  |            |   |  |            |  
|Allowance of disposed loans                                       |  |                   |   |  |            |   |  | (135        | ) |  | (2          | ) |  |            |  
|Transfer to provisions for contingent liabilities and commitments |  |                   |   |  | (15         | ) |  |            |   |  |            |   |  |            |  
|Currency translation and other adjustments                        |  | 16                 |   |  | 25          |   |  | (51         | ) |  | (86         | ) |  | 46          |  
|Recoveries of provisions previously charged off                   |  | 3                  |   |  | 21          |   |  | 18          |   |  | 26          |   |  | 25          |  
|Amounts charged off                                               |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|Ireland                                                           |  | (43                | ) |  | (66         | ) |  | (65         | ) |  | (62         | ) |  | (34         | )
|United Kingdom                                                    |  | (13                | ) |  | (28         | ) |  | (25         | ) |  | (21         | ) |  | (10         | )
|United States of America                                          |  | (2                 | ) |  |            |   |  | (23         | ) |  | (89         | ) |  | (42         | )
|Poland                                                            |  | (14                | ) |  | (57         | ) |  | (69         | ) |  | (106        | ) |  | (24         | )
|Rest of the World                                                 |  |                   |   |  |            |   |  |            |   |  | (1          | ) |  | (3          | )
|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                                                  |  | (72                | ) |  | (151        | ) |  | (182        | ) |  | (279        | ) |  | (113        | )
|Net provision movement(2)                                         |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|Ireland                                                           |  | 45                 |   |  | 68          |   |  | 77          |   |  | 51          |   |  | 119         |  
|United Kingdom                                                    |  | 54                 |   |  | 40          |   |  | 51          |   |  | 32          |   |  | 20          |  
|United States of America                                          |  | 2                  |   |  | (1          | ) |  | 10          |   |  | 97          |   |  | 49          |  
|Poland                                                            |  | 15                 |   |  | 30          |   |  | 32          |   |  | 41          |   |  | 16          |  
|Rest of the World                                                 |  | 2                  |   |  |            |   |  |            |   |  | (1          | ) |  |             |  
|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                                                  |  | 118                |   |  | 137         |   |  | 170         |   |  | 220         |   |  | 204         |  
|Recoveries of provisions previously charged off(2)                |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|Ireland                                                           |  | (2                 | ) |  | (18         | ) |  | (13         | ) |  | (12         | ) |  | (13         | )
|United Kingdom                                                    |  | (1                 | ) |  | (3          | ) |  | (2          | ) |  | (2          | ) |  | (1          | )
|United States of America                                          |  |                   |   |  |            |   |  | (3          | ) |  | (12         | ) |  | (11         | )
|Poland                                                            |  |                   |   |  |            |   |  |            |   |  |            |   |  |            |  
|Rest of the World                                                 |  |                   |   |  |            |   |  |            |   |  |            |   |  |            |  
|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                                                  |  | (3                 | ) |  | (21         | ) |  | (18         | ) |  | (26         | ) |  | (25         | )
|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|Total allowance at end of period                                  |  | 676                |   |  | 660         |   |  | 664         |   |  | 862         |   |  | 1,009       |  
|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|Allowance at end of period                                        |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|Specific                                                          |  | 514                |   |  | 383         |   |  | 348         |   |  | 435         |   |  | 539         |  
|General                                                           |  | 162                |   |  | 277         |   |  | 316         |   |  | 427         |   |  | 470         |  
|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|Total                                                             |  | 676                |   |  | 660         |   |  | 664         |   |  | 862         |   |  | 1,009       |  
|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|Amounts include:                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|Loans and advances to banks                                       |  | 2                  |   |  | 2           |   |  | 2           |   |  | 2           |   |  | 2           |  
|Loans and advances to customers                                   |  | 674                |   |  | 658         |   |  | 662         |   |  | 860         |   |  | 1,007       |  
|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                                                  |  | 676                |   |  | 660         |   |  | 664         |   |  | 862         |   |  | 1,009       |  
|                                                                  |  |                    |   |  |             |   |  |             |   |  |             |   |  |             |  

---

|(1) | In January 2005, AIB introduced a new impairment provisioning methodology. This methodology
included a number of changes in the approach used to estimate the loan impairment provisions and the accumulation and examination of additional information relating to credit trends and other factors relevant to AIBs loan portfolio. The
application of this revised methodology and the consideration of this additional information had the impact of reducing AIBs estimate of the total credit provisions by 146 million at January 1, 2005. This has been treated as a
transition adjustment to equity at January 1, 2005 under IFRS in accordance with IFRS 1. In addition, the application of the new methodology resulted in increasing our impaired loans by a net 87 million due to putting back on the Balance
Sheet 100 million of loans which had previously been charged-off centrally and regrading to earning status 13 million of these loans. Our total Balance Sheet provisions increased by 100 million as a result.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The aggregate of these sets of figures represents the total provisions for loan losses
charged to income.
|--- | ---------------------------------------------------------------------------------------------------------

Commentary on the movements are detailed on page 30 (provisions for loan losses), pages 78 and 79 (net
charge offs) and page 83 (movements in impaired loans).



77



---

##### Table of Contents

The following table reconciles the total provisions for loan losses charged to income as shown in (A),the
table on page 77 above relating to Movements in the allowance for loan losses, with that shown in (B),AIB Groups Consolidated statement of income.



|                                           |  |                          |   |  |              |  
|------------------------------------------ |  | ------------------------ | - |  | ------------ | -
|                                           |  | Years ended December 31, |  
|                                           |  | 2005 IFRS                |   |  | 2004 IR GAAP |  
|                                           |  | (Euro in millions)       |  
|(A)                                        |  |                          |   |  |              |  
|Net provision movement                     |  | 118                      |   |  | 137          |  
|Recoveries of loans previously charged off |  | (3                       | ) |  | (21          | )
|                                           |  |                          |   |  |              |  
|Total charged to income                    |  | 115                      |   |  | 116          |  
|                                           |  |                          |   |  |              |  
|(B)                                        |  |                          |   |  |              |  
|Provisions for loans losses                |  | 115                      |   |  | 116          |  
|                                           |  |                          |   |  |              |  

The following table presents additional information with respect to the provision and allowance
for loan losses for the years ended December 31, 2005, 2004, 2003, 2002 and 2001.



|                                                                                                  |  |                          |   |  |              |   |  |             |   |  |             |   |  |             |  
|------------------------------------------------------------------------------------------------- |  | ------------------------ | - |  | ------------ | - |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                                                                                                  |  | Years ended December 31, |  
|                                                                                                  |  | 2005IFRS                 |   |  | 2004 IR GAAP |   |  | 2003IR GAAP |   |  | 2002IR GAAP |   |  | 2001IR GAAP |  
|Allowance at end of period as a percentage of total loans, less unearned income, at end of period |  |                          |   |  |              |   |  |             |   |  |             |   |  |             |  
|Specific allowance                                                                                |  | 0.59                     | % |  | 0.58         | % |  | 0.68        | % |  | 0.80        | % |  | 1.04        | %
|General allowance                                                                                 |  | 0.19                     | % |  | 0.42         | % |  | 0.62        | % |  | 0.79        | % |  | 0.90        | %
|                                                                                                  |  |                          |   |  |              |   |  |             |   |  |             |   |  |             |  
|                                                                                                  |  | 0.78                     | % |  | 1.00         | % |  | 1.30        | % |  | 1.59        | % |  | 1.94        | %
|                                                                                                  |  |                          |   |  |              |   |  |             |   |  |             |   |  |             |  

The reduction in allowance from 1.00% to 0.78% is due to the increase in total loans in the period
of 27% and the impact of the adjustments referred to in note 1 on page 77 on provision methodology.

The specific allowance as a percentage
of loans is largely unchanged since 2004. Specific allowances are allocated to individual impaired loans (see page 80 for geographic split by sector).

The IBNR allowance as a percentage of loans has decreased from 0.42% to 0.19% mainly influenced by a number of factors including:



| |  |  | New impairment provisioning methodology.
| | - |  | ----------------------------------------



| |  |  | advances growth in the year of 27%.
| | - |  | -----------------------------------



| |  |  | the improvement in loss histories and credit quality in our portfolios.
| | - |  | -----------------------------------------------------------------------



|                                                                                        |  |                          |   |  |             |   |  |             |   |  |             |   |  |             |  
|--------------------------------------------------------------------------------------- |  | ------------------------ | - |  | ----------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                                                                                        |  | Years ended December 31, |  
|                                                                                        |  | 2005IFRS                 |   |  | 2004IR GAAP |   |  | 2003IR GAAP |   |  | 2002IR GAAP |   |  | 2001IR GAAP |  
|Provisions charged to income and net loans charged off as a percentage of average loans |  |                          |   |  |             |   |  |             |   |  |             |   |  |             |  
|Total provisions charged to income                                                      |  | 0.15                     | % |  | 0.20        | % |  | 0.31        | % |  | 0.37        | % |  | 0.36        | %
|                                                                                        |  |                          |   |  |             |   |  |             |   |  |             |   |  |             |  
|Net loans charged off                                                                   |  | 0.09                     | % |  | 0.22        | % |  | 0.33        | % |  | 0.48        | % |  | 0.18        | %
|                                                                                        |  |                          |   |  |             |   |  |             |   |  |             |   |  |             |  

Net loans charged-off 2005

Group net loans charged-off at 0.09% (69 million) of average advances for the year to December 2005 compares with 0.22% or 130 million for 2004.

Ireland  net loans charged-off of 40 million are 8m lower driven by a lower level of net charge-offs in ROI division.

United Kingdom  net loans charged-off of 12 million reflect lower levels of charge-offs in Capital Markets division.

USA  net loans charged-off at 2 million relate to charge-offs in the Commercial sector in our Capital Markets division.

Poland  net loans charged-off at 14 million in 2005 reflect a lower level of charge-offs of older impaired loans.

Net loans charged-off 2004

Group net loans
charged-off at 0.09% of average advances (130 million) for the year to December 2004 compares with 0.33% or 164 million for 2003.

Ireland  net loans charged-off decreased by 3.9 million on the December 2003 figure, influenced by a higher level of recovery of provisions which had previously been charged-off in AIB Bank ROI.

United Kingdom  net loans charged-off increased marginally by 1.5 million compared with December 2003. The movement in manufacturing and other
services sectors were influenced by the charge-off of a small number of individual corporate credits.

USA  there were no net loans
charged-off in 2004. The 20 million in 2003 related to Allfirst prior to its disposal.

Poland  decreased by 11 million
since 2003 and reflects the slow-down in the rate of new non-performing loans and hence charge-offs.



78



---

##### Table of Contents

The following table presents an analysis of AIB Groups loans charged off and recoveries of previous charged off
loans for the years ended December 31, 2005 and 2004.

Analysis of loans charged off



|                                 |  |                          |  |                                         |  |                  |  |                                        
|-------------------------------- |  | ------------------------ |  | --------------------------------------- |  | ---------------- |  | ---------------------------------------
|                                 |  | Years ended December 31,
|                                 |  | 2005 IFRS                |  | 2004 IR GAAP                           
|                                 |  | Loanscharged off         |  | Recoveries ofloanspreviouslycharged off |  | Loanscharged off |  | Recoveries ofloanspreviouslycharged off
|                                 |  | (Euro in millions)      
|IRELAND                          |  |                          |  |                                         |  |                  |  |                                        
|Agriculture                      |  | 3.8                      |  | 0.2                                     |  | 4.5              |  | 2.5                                    
|Energy                           |  |                         |  | 0.1                                     |  | 3.2              |  |                                       
|Manufacturing                    |  | 1.8                      |  | 0.3                                     |  | 7.8              |  | 0.6                                    
|Construction and property        |  | 1.4                      |  | 0.2                                     |  | 4.4              |  | 1.2                                    
|Distribution                     |  | 2.7                      |  | 0.2                                     |  | 5.4              |  | 1.8                                    
|Transport                        |  | 0.5                      |  |                                        |  | 1.3              |  | 0.4                                    
|Financial                        |  | 2.1                      |  |                                        |  | 0.1              |  | 0.1                                    
|Services                         |  | 9.5                      |  | 0.2                                     |  | 6.8              |  | 2.5                                    
|Personal  Residential mortgages |  | 0.1                      |  | 0.1                                     |  | 2.4              |  | 1.4                                    
| Overdraft/installment          |  | 16.3                     |  | 0.8                                     |  | 25.6             |  | 7.1                                    
|Lease financing                  |  | 4.4                      |  | 0.3                                     |  | 4.5              |  | 0.2                                    
|                                 |  |                          |  |                                         |  |                  |  |                                        
|                                 |  | 42.6                     |  | 2.4                                     |  | 66.0             |  | 17.8                                   
|                                 |  |                          |  |                                         |  |                  |  |                                        
|UNITED KINGDOM                   |  |                          |  |                                         |  |                  |  |                                        
|Agriculture                      |  |                         |  |                                        |  | 0.1              |  |                                       
|Manufacturing                    |  | 1.1                      |  |                                        |  | 9.4              |  | 0.1                                    
|Construction and property        |  | 0.3                      |  | 0.1                                     |  | 0.2              |  | 0.3                                    
|Distribution                     |  | 0.9                      |  | 0.1                                     |  | 2.7              |  | 0.7                                    
|Transport                        |  | 0.1                      |  |                                        |  | 0.2              |  | 0.1                                    
|Financial                        |  |                         |  |                                        |  | 0.1              |  |                                       
|Services                         |  | 1.1                      |  | 0.1                                     |  | 11.1             |  | 0.4                                    
|Personal  Residential mortgages |  | 0.2                      |  |                                        |  | 0.1              |  |                                       
| Overdraft/installment          |  | 9.2                      |  | 0.6                                     |  | 3.9              |  | 1.1                                    
|                                 |  |                          |  |                                         |  |                  |  |                                        
|                                 |  | 12.9                     |  | 0.9                                     |  | 27.8             |  | 2.7                                    
|                                 |  |                          |  |                                         |  |                  |  |                                        
|UNITED STATES OF AMERICA         |  |                          |  |                                         |  |                  |  |                                        
|Commercial                       |  | 2.4                      |  |                                        |  |                 |  |                                       
|                                 |  |                          |  |                                         |  |                  |  |                                        
|                                 |  | 2.4                      |  |                                        |  |                 |  |                                       
|                                 |  |                          |  |                                         |  |                  |  |                                        
|POLAND                           |  | 13.9                     |  |                                        |  | 57.5             |  |                                       
|                                 |  |                          |  |                                         |  |                  |  |                                        
|REST OF THE WORLD                |  |                         |  |                                        |  |                 |  |                                       
|                                 |  |                          |  |                                         |  |                  |  |                                        
|TOTAL                            |  | 71.8                     |  | 3.3                                     |  | 151.3            |  | 20.5                                   
|                                 |  |                          |  |                                         |  |                  |  |                                        



79



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##### Table of Contents

The following table presents an analysis of AIB Groups impairment provisions for loan losses at
December 31, 2005 and 2004.



|                                 |  |                    |  |            
|-------------------------------- |  | ------------------ |  | -----------
|                                 |  | December 31,      
|                                 |  | 2005IFRS           |  | 2004IR GAAP
|                                 |  | (Euro in millions)
|IRELAND                          |  |                    |  |            
|Agriculture                      |  | 15                 |  | 7          
|Energy                           |  | 4                  |  | 8          
|Manufacturing                    |  | 15                 |  | 11         
|Construction and property        |  | 17                 |  | 10         
|Distribution                     |  | 33                 |  | 13         
|Transport                        |  | 7                  |  | 5          
|Financial                        |  | 1                  |  | 1          
|Services                         |  | 24                 |  | 20         
|Personal  Residential mortgages |  | 8                  |  | 4          
| Overdraft/installment          |  | 72                 |  | 47         
|Lease financing                  |  | 13                 |  | 18         
|                                 |  |                    |  |            
|                                 |  | 209                |  | 144        
|                                 |  |                    |  |            
|UNITED KINGDOM                   |  |                    |  |            
|Agriculture                      |  | 2                  |  | 1          
|Energy                           |  |                   |  |           
|Manufacturing                    |  | 33                 |  | 15         
|Construction and property        |  | 9                  |  | 6          
|Distribution                     |  | 21                 |  | 17         
|Transport                        |  | 2                  |  | 2          
|Financial                        |  | 2                  |  | 2          
|Services                         |  | 42                 |  | 34         
|Personal  Residential mortgages |  | 2                  |  | 1          
| Overdraft/installment          |  | 16                 |  | 5          
|                                 |  |                    |  |            
|                                 |  | 129                |  | 83         
|                                 |  |                    |  |            
|UNITED STATES OF AMERICA         |  |                    |  |            
|Commercial                       |  | 5                  |  | 1          
|                                 |  |                    |  |            
|                                 |  | 5                  |  | 1          
|                                 |  |                    |  |            
|POLAND                           |  |                    |  |            
|Commercial                       |  | 140                |  | 122        
|Personal                         |  | 24                 |  | 26         
|Lease financing                  |  | 5                  |  | 7          
|                                 |  |                    |  |            
|                                 |  | 169                |  | 155        
|                                 |  |                    |  |            
|REST OF THE WORLD                |  | 2                  |  |           
|                                 |  |                    |  |            
|TOTAL SPECIFIC ALLOWANCE         |  | 514                |  | 383        
|                                 |  |                    |  |            
|TOTAL IBNR ALLOWANCE             |  | 162                |  | 277        
|                                 |  |                    |  |            
|TOTAL ALLOWANCE                  |  | 676                |  | 660        
|                                 |  |                    |  |            
|Amounts include:                 |  |                    |  |            
|Loans and advances to banks      |  | 2                  |  | 2          
|Loans and advances to customers  |  | 674                |  | 658        
|                                 |  |                    |  |            
|                                 |  | 676                |  | 660        
|                                 |  |                    |  |            



80



---

##### Table of Contents

Risk elements in lending

AIB Group makes provisions for loan losses in accordance with the method described under Provision and allowance for loan losses. Outside of the US, its loan control and review procedures generally do not
include the classification of loans as non-accrual, accruing past due, restructured and potential problem loans, as defined by the US Securities and Exchange Commission (SEC). Management has, however, set out below the amount of loans,
without giving effect to available security and before deduction of provisions, which would have been so classified had the SECs classification been used:



|                                                                                               |  |              |  |             |  |             |  |             |  |            
|---------------------------------------------------------------------------------------------- |  | ------------ |  | ----------- |  | ----------- |  | ----------- |  | -----------
|                                                                                               |  | December 31,
|                                                                                               |  | 2005IFRS     |  | 2004IR GAAP |  | 2003IR GAAP |  | 2002IR GAAP |  | 2001IR GAAP
|Loans accounted for on an impaired loanbasis(1)                                                |  |              |  |             |  |             |  |             |  |            
|Ireland                                                                                        |  | 347          |  | 276         |  | 264         |  | 290         |  | 195        
|United Kingdom                                                                                 |  | 246          |  | 183         |  | 111         |  | 107         |  | 107        
|United States of America                                                                       |  | 5            |  | 2           |  |            |  | 104         |  | 85         
|Poland                                                                                         |  | 262          |  | 298         |  | 332         |  | 486         |  | 643        
|Rest of the World                                                                              |  | 8            |  |            |  |            |  | 3           |  | 3          
|                                                                                               |  |              |  |             |  |             |  |             |  |            
|                                                                                               |  | 868          |  | 759         |  | 707         |  | 990         |  | 1,033      
|                                                                                               |  |              |  |             |  |             |  |             |  |            
|Accruing loans which are contractually past due 90 days or more as to principal or interest(2) |  |              |  |             |  |             |  |             |  |            
|Ireland                                                                                        |  | 124          |  | 100         |  | 95          |  | 78          |  | 63         
|United Kingdom                                                                                 |  | 61           |  | 21          |  | 18          |  | 9           |  | 18         
|United States of America                                                                       |  |             |  |            |  |            |  | 43          |  | 51         
|                                                                                               |  |              |  |             |  |             |  |             |  |            
|                                                                                               |  | 185          |  | 121         |  | 113         |  | 130         |  | 132        
|                                                                                               |  |              |  |             |  |             |  |             |  |            
|Restructured loans not included above(3)                                                       |  |             |  |            |  |            |  |            |  |           
|Other real estate and other assets owned                                                       |  |             |  |            |  |            |  | 26          |  | 14         

---

|(1) | Total interest income that would have been recorded during the year ended December 31,
2005 had interest on gross impaired loans been included in income amounted to 46 million - 15 million for Ireland, 8 million for the United Kingdom and 23 million for Poland. Interest on impaired loans (net of provisions)
included in income for the year ended December 31, 2005 totalled 19 million (using a cash-based method of accounting).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Overdrafts generally have no fixed repayment schedule and consequently are not included in this category.
|--- | ---------------------------------------------------------------------------------------------------------



|(3) | Outside of the United States, AIB Group does not normally renegotiate doubtful loans at
concessionary rates of interest.
|--- | ------------------------------------------------------------------------------------------------------------------------

AIB Group generally expects that loans where known information about possible credit
problems causes management to have serious doubt as to the ability of borrowers to comply with loan repayment terms would be included under its definition of impaired loans and would therefore have been reported in the above table.

In AIB Group, loans are typically reported as impaired when interest thereon is 90 days or more past due or where a provision exists in anticipation of
loss, except: (i) where there is sufficient evidence that repayment in full, including all interest up to the time of repayment (including costs) will be made within a reasonable and identifiable time period, either from realization of
security, refinancing commitment or other sources; (ii) where there is independent evidence that the balance due, including interest, is adequately secured; or (iii) in certain exceptional cases where there is clear evidence from cash flow
projections, provided such projections have been independently examined to the satisfaction of AIB Group, that payments will be brought up to date within a reasonable period of time not to exceed six months. Upon impairment the accrual of interest
income based on the original terms of the claim is discontinued but the increase of the present value of impaired claims due to the passage of time is reported as interest income.



81



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##### Table of Contents

The following table presents an analysis of AIB Groups loans which are accounted for on an impaired
basis at December 31, 2005 and 2004.



|                                 |  |                    |  |            
|-------------------------------- |  | ------------------ |  | -----------
|                                 |  | December 31,      
|                                 |  | 2005IFRS           |  | 2004IR GAAP
|                                 |  | (Euro in millions)
|IRELAND                          |  |                    |  |            
|Agriculture                      |  | 23                 |  | 15         
|Energy                           |  | 5                  |  | 11         
|Manufacturing                    |  | 23                 |  | 21         
|Construction and property        |  | 29                 |  | 20         
|Distribution                     |  | 61                 |  | 52         
|Transport                        |  | 11                 |  | 10         
|Financial                        |  | 2                  |  | 1          
|Services                         |  | 41                 |  | 37         
|Personal - Residential mortgages |  | 37                 |  | 26         
|- Overdraft/installment          |  | 98                 |  | 63         
|Lease financing                  |  | 17                 |  | 20         
|                                 |  |                    |  |            
|                                 |  | 347                |  | 276        
|                                 |  |                    |  |            
|UNITED KINGDOM                   |  |                    |  |            
|Agriculture                      |  | 3                  |  | 1          
|Manufacturing                    |  | 41                 |  | 26         
|Construction and property        |  | 24                 |  | 17         
|Distribution                     |  | 61                 |  | 43         
|Transport                        |  | 4                  |  | 4          
|Financial                        |  | 4                  |  | 5          
|Services                         |  | 73                 |  | 70         
|Personal - Residential mortgages |  | 13                 |  | 7          
|- Overdraft/installment          |  | 23                 |  | 10         
|                                 |  |                    |  |            
|                                 |  | 246                |  | 183        
|                                 |  |                    |  |            
|UNITED STATES OF AMERICA         |  |                    |  |            
|Commercial                       |  | 5                  |  | 2          
|                                 |  |                    |  |            
|                                 |  | 5                  |  | 2          
|                                 |  |                    |  |            
|POLAND                           |  |                    |  |            
|Agriculture                      |  | 47                 |  | 46         
|Energy                           |  | 2                  |  |           
|Manufacturing                    |  | 67                 |  | 67         
|Construction and property        |  | 22                 |  | 45         
|Distribution                     |  | 64                 |  | 72         
|Transport                        |  | 4                  |  | 10         
|Financial                        |  | 2                  |  | 2          
|Services                         |  | 13                 |  | 12         
|Personal - Residential mortgages |  | 14                 |  | 13         
|- Overdraft/installment          |  | 19                 |  | 21         
|Lease financing                  |  | 8                  |  | 10         
|                                 |  |                    |  |            
|                                 |  | 262                |  | 298        
|                                 |  |                    |  |            
|REST OF THE WORLD                |  | 8                  |  |           
|                                 |  |                    |  |            
|TOTAL                            |  | 868                |  | 759        
|                                 |  |                    |  |            



82



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##### Table of Contents

Impaired Loans

Group impaired loans increased by 109 million between December 31, 2004 and December 31, 2005 but as a percentage of advances decreased to 1.0% from 1.3%. 87 million (73 million in ROI
division and 14 million in GB/NI division) of the increase was due to loans which had previously been charged-off centrally, being put back onto the balance sheet as a result of a new impairment provisioning methodology (see note 1 to the
table on page 77). The following geographic commentary will relate to the remaining 22 million increase.

In the Republic of Ireland,
impaired loans decreased by 2 million during the year to December 31, 2005 and have reduced as a percentage of advances from 0.8% at December 2004 to 0.6%. Impaired loans in the ROI division increased by 14 million offset by a
decrease in the Capital Markets division where there were a number of recoveries / reductions in levels of debt.

In the United Kingdom,
impaired loans increased by 49 million to 246 million. The increase is mainly in our Capital Markets division where impaired loans increased by 36 million due to the addition of a number of cases spread over Manufacturing / Other
Services / Distribution sectors. GB/NI divisions impaired loans increased by 13 million in the period.

In Poland there has
been a decrease of 36 million (53 million net of currency exchange rate movements) in impaired loans in the year to December 31, 2005 assisted by a reduction in the rate of gross new impaired loans during 2005. Impaired loans have
reduced as a percentage of advances from 8.4% at December 31, 2004 to 6.8% at December 31, 2005.

In the United States, impaired
loans increased by 3 million to 5 million.

In Rest of the World, impaired loans increased by 8 million to 8
million due to the addition of a single corporate credit in mainland Europe.

The classification of a loan as impaired does not necessarily
indicate that the principal amount of the loan is uncollectible in whole or in part. As described above under Provision and allowance for loan losses on page 76, the provision made in respect of any particular loan is calculated net of
any realizable security value and other identifiable repayment sources, while the full principal amount of the loan is reflected as impaired before any deduction for provisions, security values or other elements of loans that may be partially
recoverable.

The allowance for loan losses as a percentage of impaired loans decreased to 78% as at December 31, 2005, from 87% as at
December 31, 2004, due to the new provisioning methodology, advances growth in the year of 27% and the improvement in loss histories in our portfolios.

The Specific provision set aside to cover identified impaired loans represents 59% of these loans.

In
accordance with AIB Groups provisioning policy for loan losses, it is considered that appropriate provisions for the above losses have been made. See Provision and allowance for loan losses on page 76.



83



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##### Table of Contents

Cross-border outstandings

Cross-border outstandings, which exclude finance provided within AIB Group, are based on the country of domicile of the borrower and comprise placings with banks and money at call and short notice, loans to customers,
finance lease receivables and installment credit, acceptances and other monetary assets, including non-local currency claims of overseas offices on local residents. AIB Group monitors geographic breakdown based on the country of the borrower and the
guarantor of ultimate risk.

Cross-border outstandings exceeding 1% of total assets are shown in the following table.



|                  |  |                       |   |  |       |  |                                     |  |                                    |  |                                           
|----------------- |  | --------------------- | - |  | ----- |  | ----------------------------------- |  | ---------------------------------- |  | ------------------------------------------
|                  |  | As % oftotalassets(1) |   |  | Total |  | Banks andotherfinancialinstitutions |  | Governmentand officialinstitutions |  | Commercialindustrialand otherprivatesector
|                  |  | (Euro in millions)   
|December 31, 2005 |  |                       |   |  |       |  |                                     |  |                                    |  |                                           
|United Kingdom    |  | 5.5                   | % |  | 7,312 |  | 2,753                               |  | 958                                |  | 3,601                                     
|United States     |  | 5.1                   | % |  | 6,814 |  | 891                                 |  | 1,007                              |  | 4,916                                     
|Germany           |  | 2.6                   | % |  | 3,507 |  | 1,813                               |  | 1,313                              |  | 381                                       
|France            |  | 2.5                   | % |  | 3,361 |  | 2,347                               |  | 561                                |  | 453                                       
|Spain             |  | 2.1                   | % |  | 2,803 |  | 1,665                               |  | 272                                |  | 866                                       
|Netherlands       |  | 1.3                   | % |  | 1,736 |  | 862                                 |  | 352                                |  | 522                                       
|Australia         |  | 1.3                   | % |  | 1,684 |  | 662                                 |  |                                   |  | 1,022                                     
|Italy             |  | 1.0                   | % |  | 1,378 |  | 338                                 |  | 761                                |  | 279                                       
|Sweden            |  | 1.0                   | % |  | 1,326 |  | 696                                 |  | 568                                |  | 62                                        
|December 31, 2004 |  |                       |   |  |       |  |                                     |  |                                    |  |                                           
|United Kingdom    |  | 8.4                   | % |  | 8,476 |  | 1,718                               |  | 725                                |  | 6,033                                     
|United States     |  | 4.0                   | % |  | 3,990 |  | 660                                 |  | 1,141                              |  | 2,189                                     
|Germany           |  | 2.9                   | % |  | 2,964 |  | 1,947                               |  | 807                                |  | 210                                       
|France            |  | 2.1                   | % |  | 2,098 |  | 1,224                               |  | 360                                |  | 514                                       
|Spain             |  | 2.0                   | % |  | 2,000 |  | 1,160                               |  | 283                                |  | 557                                       
|Netherlands       |  | 1.4                   | % |  | 1,381 |  | 648                                 |  | 233                                |  | 500                                       
|Italy             |  | 1.3                   | % |  | 1,304 |  | 211                                 |  | 724                                |  | 369                                       
|Australia         |  | 1.2                   | % |  | 1,205 |  | 536                                 |  |                                   |  | 669                                       
|December 31, 2003 |  |                       |   |  |       |  |                                     |  |                                    |  |                                           
|United Kingdom    |  | 6.1                   | % |  | 4,962 |  | 1,852                               |  | 548                                |  | 2,562                                     
|United States     |  | 3.6                   | % |  | 2,896 |  | 342                                 |  | 686                                |  | 1,868                                     
|Germany           |  | 2.6                   | % |  | 2,122 |  | 1,466                               |  | 488                                |  | 168                                       
|Spain             |  | 1.7                   | % |  | 1,356 |  | 352                                 |  | 255                                |  | 749                                       
|Netherlands       |  | 1.6                   | % |  | 1,298 |  | 556                                 |  | 87                                 |  | 655                                       
|Italy             |  | 1.4                   | % |  | 1,136 |  | 158                                 |  | 691                                |  | 287                                       
|Poland            |  | 1.3                   | % |  | 1,035 |  | 61                                  |  | 87                                 |  | 887                                       
|Australia         |  | 1.1                   | % |  | 854   |  | 346                                 |  |                                   |  | 508                                       

---

|(1) | Assets, consisting of total assets as reported in the consolidated balance sheet and
acceptances, totalled 133,214 million at December 31, 2005 (2004: 101,121 million).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At December 31,
2005 cross-border outstandings to borrowers in Poland amounted to 0. 86%. At December 31, 2004 cross-border outstandings to borrowings in Sweden amounted to 0.94%.

Concentrations of credit risk

Concentrations of credit risk exist when changes in economic, industry
or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to AIB Groups total credit exposure. Although AIB Groups portfolio of financial instruments is broadly diversified
along industry, product and geographic lines, material transactions are completed with other financial institutions, particularly in securities trading, derivative, and foreign exchange business.



84



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##### Table of Contents

PART II



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 13. |  | Defaults, dividend arrearages and delinquencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         | 
|         |  | (a) None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         | 
|         |  | (b) None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         | 
|Item 14. |  | Material modifications to the rights of security holders and use of proceeds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | 
|         |  | (a) None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         | 
|         |  | (b) None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         | 
|         |  | (c) Not applicable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | 
|         |  | (d) No changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         | 
|         |  | (e) Not applicable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | 
|Item 15. |  | Controls and procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         | 
|         |  | Evaluation of disclosure controls and procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | 
|         |  | Within the 90 days prior to the date of this report, the Group carried out an evaluation under the supervision of and with the participation of the Groups management, including the Group
Chief Executive and the Group Finance Director of the effectiveness of the design and operation of the Groups disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and
procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control
objectives. As a result of the matters identified as a result of investigations in 2004, a management action plan was agreed to, interalia, strengthen enterprise-wide quality assurance, risk and compliance functions. Based upon and as of the date of
the Groups evaluation, the Group Chief Executive and the Group Finance Director concluded that the disclosure controls and procedures are effective in all material respects to ensure that information required to be disclosed in the reports the
Group files and submits under the US Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported as and when required.
|         | 
|Item 16. |  | (a) Audit committee financial expert                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | 
|         |  | The Board of Directors has determined that Mr Adrian Burke is an Audit committee financial expert as defined by the regulations of the Securities and Exchange Commission issued
pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. Mr Burke has accepted this determination by the Board on the understanding that he has not agreed to undertake additional responsibilities beyond those of a member (and Chairman) of the
Audit Committee. For a description of his experience see Item 6: Directors, Senior Management and Employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | 
|         |  | (b) Code of ethics                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | 
|         |  | AIB Group has adopted a code of business ethics that applies to our principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, and to all employees of the Group. A copy of this code of business ethics is available on our Internet website at http://www.aibgroup.com/investorrelations. (The information found at
this website is not incorporated by reference into this document). There have been no amendments or waivers to this code of business ethics since its adoption. Information regarding any future amendments or waivers will be published on the
aforementioned website.  The code of business ethics sets out the
general principles for all employees that govern how AIB Group conducts its affairs. To complement this, a code of leadership behaviours for senior management of AIB was approved during 2004. This code of leadership behaviours places personal
responsibility on senior management for ensuring that our business and support activities are carried out with the highest standards of behaviour.                                                                                                                                                                                                                                          
|         | 
|         |  | (c) Principal accountant fees and services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | 
|         |  | The audit committee is responsible for approving and reviewing the appointment and retirement of the external auditors, as well as overseeing their relationship with the Group. This includes
conducting an annual review of the independence and effectiveness of the external auditors and the recommendation to the Board as to the level of fees to be paid to the external auditors. Further details as to the levels of fees paid to the external
auditors in each of the last two years as well as the Audit Committees pre-approval policy for non-audit work are provided in Note 10 to the consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



85



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##### Table of Contents

PART III



|Item 17. | Financial statements
|-------- | --------------------

(Not responded to as Item 18 is complied with)



|Item 18 and | 19.Financial statements and exhibits
|----------- | ------------------------------------



| | (a) | Financial statements
| | --- | --------------------



|                                                                     |  |     
|-------------------------------------------------------------------- |  | ----
|Index                                                                |  | Page
|FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS   |  | 87  
|ACCOUNTING POLICIES                                                  |  | 88  
|CONSOLIDATED STATEMENTS OF INCOME                                    |  | 101 
|CONSOLIDATED BALANCE SHEETS                                          |  | 102 
|CONSOLIDATED RECONCILIATION OF MOVEMENTS IN STOCKHOLDERS EQUITY     |  | 103 
|CONSOLIDATED STATEMENT OF CASH FLOWS                                 |  | 104 
|STATEMENT OF RECOGNIZED INCOME AND EXPENSE                           |  | 106 
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                           |  | 107 
|STATEMENT OF DIRECTORS RESPONSIBILITIES IN RELATION TO THE ACCOUNTS |  | 186 
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  KPMG       |  | 187 



| | (b) | Exhibits
| | --- | --------



|               |  |                                                  
|-------------- |  | -------------------------------------------------
|Exhibit Number |  | Description                                      
|               | 
|1.1            |  | Special resolutions of Allied Irish Banks, p.l.c.
|               | 
|31.1           |  | Section 302 Certifications - Eugene Sheehy       
|               | 
|31.2           |  | Section 302 Certifications - John ODonnell      
|               | 
|32.1           |  | Section 906 Certifications - Eugene Sheehy       
|               | 
|32.2           |  | Section 906 Certifications - John ODonnell      



86



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

First time adoption of International Financial Reporting Standards (IFRS)

Up to and including the year ended December 31, 2004, AIBs primary financial statements were prepared in accordance with
Irish Generally Accepted Accounting Principles (Irish GAAP). On January 1, 2005, AIB Group implemented the requirements of International Financial Reporting Standards and International Accounting Standards (collectively,
IFRS) for the first time and these are used for the purpose of preparing the financial statements for the year ended December 31, 2005. These financial statements have been prepared based on the recognition and measurement
requirements of IFRS issued by the International Accounting Standards Board (IASB) as adopted by the European Union (EU).

In accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards (IFRS 1), there have been no adjustments to the estimates made at the time of the approval of the Irish GAAP financial
statements for the year ended December 31, 2004. IFRS 1 provides first time adopters of IFRS with certain exemptions. IFRS 1 also allows or requires a number of other exceptions to its general principle that the standards in force at the
reporting date should be applied retrospectively. AIB has availed of certain exemptions as set out below:-

First time application relating to financial
instruments and insurance contracts

AIB has availed of transitional provisions for IAS 32 Financial Instruments: Disclosure and
Presentation (IAS 32), IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) and IFRS 4 Insurance Contracts (IFRS 4) and has not presented comparative information in
accordance with these standards in its 2005 financial statements. Accordingly, comparative information for 2004 in respect of financial instruments and insurance contracts has been prepared on the basis of the Groups accounting policies under
Irish GAAP.

Share based payments

AIB
has implemented the requirements of IFRS 2 Share Based Payment (IFRS 2) to all equity settled share based payments granted after November 7, 2002 that had not vested by January 1, 2005.

Property, plant & equipment

AIB has
retained its existing carrying value of occupied properties, plant and equipment at January 1, 2004 as deemed cost, as permitted by IFRS 1, rather than either reverting to historical cost or carrying out a valuation at the date of transition.

Cumulative exchange differences

AIB
has elected to deem cumulative exchange differences on the net investments in foreign branches and subsidiaries to be zero at January 1, 2004, as permitted by IFRS 1.

Employee benefits

AlB has recognised the cumulative actuarial gains and losses of defined benefit
pension schemes and other post retirement benefits upon transition at January 1, 2004.

Business combinations

AIB has elected not to apply IFRS 3 Business Combinations to business combinations that arose prior to January 1, 2004.

Derecognition of financial instruments

Financial
instruments derecognized prior to January 1, 2004 have not been subsequently recognised by the Group under IFRS.

Effects of the transition to IFRS

A description of the differences between Irish GAAP and IFRS accounting policies is set out in note 59. Reconciliations of balance
sheets prepared under Irish GAAP and IFRS at January 1, 2005 and December 31, 2004 are included in note 59. A reconciliation of the profit and loss accounts prepared in accordance with Irish GAAP and prepared in accordance with IFRS for
the period ended December 31, 2004 is included in note 59. In addition, a reconciliation of the amount of shareholders equity at January 1, 2005, before and after the application of IAS 32, IAS 39 and IFRS 4, detailing the effects of
their application on the January 1, 2005 balance sheet, is presented in note 1.



87



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Accounting policies

The accounting policies that the Group applied in the preparation of the financial statements for the year ended December 31, 2005 are set out below. Because AIB
has availed of the transitional provisions for IAS 32 Financial Instruments: Disclosure and Presentation (IAS 32), IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) and IFRS 4
Insurance Contracts (IFRS 4), it has not presented comparative information in accordance with these standards in its 2005 financial statements. Accordingly, comparative information for 2004 in respect of financial instruments
and insurance contracts has been prepared on the basis of the Groups accounting policies under Irish GAAP. These accounting policies applied in the comparative IFRS financial statements are set out on pages 99 to 100.

1 Statement of compliance

The consolidated financial statements have
been presented in accordance with International Accounting Standards and International Financial Reporting Standards (collectively IFRS) as adopted by the EU and applicable at December 31, 2005. The financial statements also comply
with the requirements of Irish Statute comprising the Companies Acts 1963 to 2005 and the European Communities (Credit Institutions: Accounts) Regulations, 1992 as amended by the European Communities (International Financial Reporting Standards and
Miscellaneous Amendments) Regulations 2005. The Group financial statements have been prepared in accordance with IFRSs as adopted by the EU. In publishing the Group financial statements, AIB has taken advantage of the exemption in paragraph 2 of the
European Communities (Credit Institutions: Accounts) Regulations, 1992 not to present its individual income statement and related notes that form part of these approved financial statements.

The Group has early adopted the fair value option under IAS 39 and amendments to IAS 19 - Actuarial Gains and Losses, Group Plans and Disclosures, both
of which have been adopted by the EU.

2 Basis of preparation

The financial statements are presented in euro, rounded to the nearest million. They have been prepared under the historical cost basis, with the exception of the following assets and liabilities and derivatives which are stated at their
fair value: derivative financial instruments, financial instruments at fair value through profit or loss, certain hedged financial assets and financial liabilities, financial instruments held for trading and financial assets classified as available
for sale.

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the
application of policies and reported amounts of certain assets, liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. The estimates and assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances. Since managements judgement involves making estimates concerning the likelihood of future events, the actual results could differ from those estimates. The estimates that have a
significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are in the areas of impairment of financial assets, retirement benefit liabilities, share based payments and fair value of
certain financial assets and financial liabilities. A description of these estimates and judgments is set out on pages 22 and 23.

Except
as described above in respect of financial instruments and insurance contracts, the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and in preparing the opening
IFRS balance sheet at January 1, 2004 for the purpose of transition to IFRS.

The accounting policies have been consistently applied
by Group entities.

3 Basis of consolidation

Subsidiary undertakings

The Group financial information includes the accounts of Allied Irish Banks, p.l.c. (the parent company) and its
subsidiary undertakings, including certain special purpose entities where appropriate, made up to the end of the financial year. A subsidiary is one where the Group has the power, directly or indirectly, to govern the financial and operating
policies of the entity, so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered in assessing whether the Group controls the entity.

Subsidiaries are consolidated from the date on which control is transferred to the Group until the date that control ceases.

The Group uses the purchase method of accounting to account for the acquisition of subsidiary undertakings. The cost of an acquisition is measured as the
fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of the transaction, plus costs directly attributable to the acquisition. Identifiable assets acquired are fair valued at the acquisition date,
irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Groups share of the identifiable net assets acquired is recorded as goodwill.

Associated undertakings

An associate is generally one in which the
Groups interest is greater than 20% and less than 50% and in which the Group has significant influence, but not control, over the entitys operating and financial policies.

Investments in associated undertakings are initially recorded at cost and increased (or decreased) each year by the Groups share of the post
acquisition net income (or loss), and other movements reflected directly in the equity of the associated undertaking.

Goodwill arising on
the acquisition of an associated undertaking is included in the carrying amount of the investment (net of any accumulated impairment loss). When the Groups share of losses in an associate has reduced the carrying amount to zero, including any
other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations to make payments on behalf of the entity.



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Accounting policies - (Continued)

3 Basis of consolidation(continued)



The Groups share of the results of associates after tax reflects the Groups proportionate
interest in the associates and is based on financial statements made up to a date not earlier than three months before the balance sheet date, adjusted to conform with the accounting polices of the Group.

Transactions eliminated on consolidation

Intra-group balances and
any unrealized gains and losses, or income and expenses, arising from intra-group transactions are eliminated on consolidation. Unrealized gains on transactions with associated undertakings are eliminated to the extent of the Groups interest
in the investees.

4 Foreign currency translation

The consolidated financial statements are presented in Euro, which is the Groups presentation currency.

Items included in the financial statements of each of the Groups entities are measured using their functional currency, being the currency of the primary economic environment in which the entity operates.

Transactions and balances

Foreign currency transactions are
translated into the respective entitys functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate prevailing at the
period end. Foreign exchange gains and losses resulting from the settlement of such transactions and from the retranslation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the
income statement except for qualifying cash flow hedges. Exchange differences on equities and similar non-monetary items held at fair value through profit or loss are reported as part of the fair value gain or loss. Translation differences on
equities classified as available-for-sale financial assets are included directly in equity.

Foreign operations

The results and financial position of all Group entities that have a functional currency different from the Euro are translated into Euro as follows:-



| |  |  | assets and liabilities including goodwill and fair value adjustments arising on consolidation of foreign operations are translated at the closing rate;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | income and expenses are translated into Euro at the average rates of exchange during the period where these rates approximate to the foreign exchange rates ruling at the dates of
the transactions; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all resulting exchange differences are included in cumulative translation reserves within shareholders equity.
| | - |  | ---------------------------------------------------------------------------------------------------------------

Exchange differences arising after January 1, 2004, the date of transition to IFRS, from the translation of the net investment in foreign
operations, and of borrowings designated as hedges of such investments, are taken to a separate component of shareholders equity and included in the profit or loss on disposal or partial disposal of the foreign operations.

5 Interest income and expense recognition

Interest income and
expense is recognised in the income statement for all interest-bearing financial instruments using the effective interest method.

The
effective interest method is a method of calculating the amortized cost of a financial asset or financial liability (or group of assets and liabilities) and of allocating the interest income or interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts the expected future cash payments or receipts through the expected life of the financial instrument, or when appropriate, a shorter period, to the net carrying amount of the financial asset
or financial liability. The application of the method has the effect of recognizing income (and expense) receivable (or payable) on the instrument evenly in proportion to the amount outstanding over the period to maturity or repayment.

In calculating the effective interest rate, the Group estimates cash flows (using projections based on its experience of customers behaviour)
considering all contractual terms of the financial instrument but excluding future credit losses. The calculation takes into account all fees, including those for early redemption, and points paid or received between parties to the contract that are
an integral part of the effective interest rate, transaction costs and all other premiums and discounts.

All costs associated with
mortgage incentive schemes are included in the effective interest calculation. Fees and commissions payable to third parties in connection with lending arrangements, where these are direct and incremental costs related to the issue of a financial
instrument, are included in interest income as part of the effective interest rate.



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ALLIED IRISH BANKS, p.l.c.

Accounting policies - (Continued)



6 Fee and commission income

Fees and commissions are generally recognized on an accruals basis when the service has been provided, unless they have been included in the effective interest rate calculation. Loan syndication fees are recognized as
revenue when the syndication has been completed and the Group has retained no part of the loan package for itself or retained a part at the same effective interest rate as applicable to the other participants.

Portfolio and other management advisory and service fees are recognized based on the applicable service contracts. Asset management fees related to
investment funds are recognized over the period the service is provided. The same principle is applied to the recognition of income from wealth management, financial planning and custody services that are continuously provided over an extended
period of time.

Commitment fees, together with related direct costs, for loan facilities where draw down is probable are deferred and
recognised as an adjustment to the effective interest on the loan once drawn. Commitment fees in relation to facilities where draw down is not probable are recognized over the term of the commitment.

7 Financial assets

The Group classifies its financial assets into
the following categories: - financial assets at fair value through profit or loss; loans and receivables; held to maturity investments; and available for sale financial assets.

Purchases and sales of financial assets are recognized on trade date, being the date on which the Group commits to purchase or sell the assets. Loans are
recognized when cash is advanced to the borrowers. Financial assets are initially recognized at fair value, however, with the exception of financial assets at fair value through profit or loss, the initial fair value includes direct and incremental
transaction costs.

The fair value of assets traded in active markets is based on current bid prices. In the absence of current bid prices,
the Group establishes a fair value using valuation techniques. These include the use of recent arms-length transactions, reference to other similar instruments, discounted cash flow analysis, option pricing models and other valuation
techniques commonly used by market participants.

Interest is calculated using the effective interest method and credited to the income
statement. Dividends on available-for-sale equity securities are recognised in the income statement when the entitys right to receive payment is established. Impairment losses and translation differences on monetary items are recognized in the
income statement.

Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or when
the Group has transferred substantially all the risks and rewards of ownership.

Financial assets at fair value through profit or loss

This category has two sub categories: - Financial assets held for trading; and those designated at fair value through profit or loss at inception. A financial asset is
classified in this category if it is held primarily for the purpose of selling in the short term, or if it is so designated by management, subject to certain criteria.

The assets are recognized initially at fair value and transaction costs are taken directly to the income statement. Interest and dividends on assets within this category are reported in interest income, and dividend
income, respectively. Gains and losses arising from changes in fair value are included directly in the income statement within other financial income.

Derivatives are also classified in this category unless they have been designated as hedges.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and which are not
classified as available for sale. They arise when the Group provides money or services directly to a customer with no intention of trading the loan. Loans and receivables are initially recognized at fair value including direct and incremental
transaction costs and are subsequently carried on an amortized cost basis.

Held to maturity

Held to maturity investments are non-derivative financial assets with fixed or determinable payments that the Groups management has the intention and ability to
hold to maturity. If the Group was to sell other than an insignificant amount of held to maturity assets, the entire category would be required to be reclassified as available for sale.

Available for sale

Available for sale investments are non-derivative financial investments that are designated as
available for sale and are not categorized into any of the other categories described above. Available for sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or
changes in interest rates, exchange rates or equity prices.

Available for sale investments are initially recognised at fair value
including direct and incremental transaction costs. They are subsequently held at fair value. Gains and losses arising from changes in fair value are included as a separate component of equity until sale when the cumulative gain or loss is
transferred to the income statement.



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Accounting policies - (Continued)



8 Financial liabilities

Issued financial instruments or their components are classified as liabilities where the substance of the contractual arrangement results in the Group having a present obligation to either deliver cash or another financial asset to the
holder, to exchange financial instruments on terms that are potentially unfavourable or to satisfy the obligation otherwise than by the exchange of a fixed amount of cash or another financial asset for a fixed number of equity shares.

Financial liabilities are initially recognized at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs
incurred. Financial liabilities are subsequently measured at amortized cost, any difference between the proceeds net of transaction costs and the redemption value is recognized in the income statement using the effective interest method.

Preference shares, which carry a mandatory coupon, are classified as financial liabilities. The dividends on these preference shares are recognized in
the income statement as interest expense using the effective interest method.

9 Property, plant and equipment

Property, plant and equipment are stated at cost, or deemed cost, less accumulated depreciation and provisions for impairment, if any. Additions and subsequent
expenditures are capitalised only to the extent that they enhance the future economic benefits expected to be derived from the asset. No depreciation is provided on freehold land. Property, plant and equipment are depreciated on a straight line
basis over their estimated useful economic lives. Depreciation is calculated based on the gross carrying amount, less the estimated residual value at the end of the assets economic life.

The Group uses the following useful lives when calculating depreciation:



|                                                       |  |                              
|------------------------------------------------------ |  | -----------------------------
|Freehold buildings and long-leasehold property         |  | 50 years                     
|                                                       | 
|Short leasehold property                               |  | Life of lease, up to 50 years
|                                                       | 
|Costs of adaptation of freehold and leasehold property |  |                              
|                                                       | 
|Branch properties                                      |  | up to 10 years*              
|                                                       | 
|Office properties                                      |  | up to 15 years*              
|                                                       | 
|Computers and similar equipment                        |  | 3  5 years                  
|                                                       | 
|Fixtures and fittings and other equipment              |  | 3  10 years                 



|* | Subject to the maximum remaining life of the lease.
|- | ---------------------------------------------------

The
Group reviews its depreciation rates regularly, at least annually, to take account of any change in circumstances. When deciding on useful lives and methods, the principal factors that the Group takes into account are the expected rate of
technological developments and expected market requirements for, and the expected pattern of usage of the assets. When reviewing residual values, the Group estimates the amount that it would currently obtain for the disposal of the asset, after
deducting the estimated cost of disposal if the asset were already of the age and condition expected at the end of its useful life. Gains and losses on disposal of property, plant and equipment are included in the income statement.

It is Group policy not to revalue its property, plant and equipment.

10 Intangible assets

Goodwill

Goodwill may arise on the acquisition of subsidiary and associated undertakings. Purchased goodwill is the excess of the fair value of the purchase consideration and direct costs of making the acquisition, over the
fair value of the Groups share of the assets acquired and the liabilities and contingent liabilities assumed on the date of the acquisition. For the purpose of calculating goodwill, fair values of acquired assets, liabilities and contingent
liabilities are determined by reference to market values or by discounting expected future cash flows to present value. This discounting is performed by using either market rates or by using risk-free rates and risk adjusted expected future cash
flows.

Goodwill is capitalized and reviewed annually for impairment, or more frequently when there are indications that impairment may
have occurred. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Goodwill arising on the acquisition of an associated undertaking is included in the carrying amount of the investment in the consolidated financial
statements. Gains or losses on the disposal of an entity include the carrying amount of the goodwill relating to the entity sold. Capitalized goodwill was tested for impairment as at January 1, 2004, the date of transition to IFRS.

Goodwill previously written off to reserves under Irish GAAP has not been reinstated and will not be included in calculating any subsequent profit or
loss on disposal.

Computer software

Computer software
is stated at cost, less amortization on a straight line basis and provisions for impairment, if any. The identifiable and directly associated external and internal costs of acquiring and developing software are capitalized where the software is
controlled by the Group, and where it is probable that future economic benefits that exceed its cost will flow from its use over more than one year. Costs associated with maintaining software are recognized as an expense when incurred. Capitalised
computer software is amortized over 3 to 5 years.



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Accounting policies - (Continued)

11 Derivatives and hedge accounting



Derivatives, such as interest rate swaps, options and forward rate agreements are used for trading and for hedging
purposes.

The Group maintains trading positions in a variety of financial instruments including derivatives. Trading transactions arise
both as a result of activity generated by customers and from proprietary trading with a view to generating incremental income.

Non-trading
derivative transactions comprise transactions held for hedging purposes as part of the Groups risk management strategy against assets, liabilities, positions or cash flows, and are accounted for on an amortized cost basis.

Derivatives

Derivatives are measured initially at fair value on the
date on which the derivative contract is entered into and subsequently remeasured at fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions, valuation techniques, discounted cash flow
models and options pricing models as appropriate. Derivatives are included in assets when their fair value is positive, and in liabilities when their fair value is negative, unless there is the legal ability and intention to settle net. Profits or
losses are only recognized on initial recognition of derivatives when there are observable current market transactions or valuation techniques that are based on observable market inputs.

The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the consideration given or
received) unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables
include only data from observable markets.

Embedded derivatives

Some hybrid contracts contain both a derivative and a non-derivative component. In such cases, the derivative component is termed an embedded derivative. Where the economic characteristics and risks of embedded
derivatives are not closely related to those of the host contract, and the hybrid contract itself is not carried at fair value through profit or loss, the embedded derivative is treated as a separate derivative, and reported at fair value with gains
and losses being recognized in the income statement.

Hedging

All derivatives are carried at fair value in the balance sheet and the accounting treatment of the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item
being hedged. Where derivatives are held for risk management purposes, and when transactions meet the criteria specified in IAS 39, the Group designates certain derivatives as either: -



| | (1) | hedges of the fair value of recognized assets or liabilities or firm commitments (fair value hedge); or
| | --- | -------------------------------------------------------------------------------------------------------



| | (2) | hedges of the exposure to variability of cash flows attributable to a recognized asset or liability, or a highly probable forecasted transaction (cash flow hedge); or
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | hedges of a net investment in a foreign operation.
| | --- | --------------------------------------------------

When
a financial instrument is designated as a hedge, the Group formally documents the relationship between the hedging instrument and hedged item as well as its risk management objectives and its strategy for undertaking the various hedging
transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of
hedged items.

The Group discontinues hedge accounting when:



| | a) | it is determined that a derivative is not, or has ceased to be, highly effective as a hedge;
| | -- | --------------------------------------------------------------------------------------------



| | b) | the derivative expires, or is sold, terminated, or exercised;
| | -- | -------------------------------------------------------------



| | c) | the hedged item matures or is sold or repaid; or
| | -- | ------------------------------------------------



| | d) | a forecast transaction is no longer deemed highly probable.
| | -- | -----------------------------------------------------------

To the extent that the changes in the fair value of the hedging derivative differ from changes in the fair value of the hedged risk in the hedged item; or the cumulative change in the fair value of the hedging derivative differs from the
cumulative change in the fair value of expected future cash flows of the hedged item, ineffectiveness arises. The amount of ineffectiveness, (taking into account the timing of the expected cash flows, where relevant) provided it is not so great as
to disqualify the entire hedge for hedge accounting, is recorded in the income statement.

In certain circumstances, the Group may decide
to cease hedge accounting even though the hedge relationship continues to be highly effective by no longer designating the financial instrument as a hedge.

Fair value hedge accounting

Changes in fair value of derivatives that qualify and are designated as fair value hedges are recorded in the
income statement, together with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. If the hedge no longer meets the criteria for hedge accounting, the fair value hedging adjustment cumulatively made
to the carrying value of the hedged item is, for items carried at amortized cost, amortized over the period to maturity of the previously designated hedge relationship using the effective interest method. For available for sale items the fair value
hedging adjustment remains in equity until the hedged item affects profit or loss. If the hedged item is sold or repaid, the unamortized fair value adjustment is recognized immediately in the income statement.



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Accounting policies - (Continued)

11 Derivatives and hedge accounting(continued)



Cash flow hedge accounting

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is initially recognized directly in shareholders equity and recycled to the income statement
in the periods when the hedged item will affect profit or loss. Any ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement immediately.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in
equity at that time, remains in equity and is recognized in the income statement when the forecast transaction arises. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
transferred to the income statement.

Net investment hedge

Hedges of net investments in foreign operations, including monetary items that are accounted for as part of the net investment, are accounted for similarly to cash flow hedges. The effective portion of the gain or loss on the hedging
instrument is recognized directly in equity and the ineffective portion is recognised immediately in the income statement. The cumulative gain or loss previously recognised in equity is recognised in the income statement on the disposal or partial
disposal of the foreign operation. Hedges of net investments may include non-derivative liabilities as well as derivative financial instruments.

Derivatives that do not qualify for hedge accounting

Certain derivative contracts entered into as economic hedges do not qualify for hedge
accounting. Changes in the fair value of derivative instruments that do not qualify for hedge accounting are recognized immediately in the income statement.

12 Impairment of financial assets

It is Group policy to make provisions for impairment of financial assets to reflect the losses inherent
in those assets at the balance sheet date.

The Group assesses at each balance sheet date whether there is objective evidence that a
financial asset or a portfolio of financial assets is impaired. A financial asset or portfolio of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more
loss events that occurred after the initial recognition of the asset and on or before the balance sheet date, (a loss event) and that loss event or events has had an impact such that the estimated present value of future cash flows is
less than the current carrying value of the financial asset, or portfolio of financial assets.

Objective evidence that a financial asset,
or a portfolio of financial assets, is impaired includes observable data that comes to the attention of the Group about the following loss events:



| | a) | significant financial difficulty of the issuer or obligor;
| | -- | ----------------------------------------------------------



| | b) | a breach of contract, such as a default or delinquency in interest or principal payments;
| | -- | -----------------------------------------------------------------------------------------



| | c) | the granting to the borrower of a concession, for economic or legal reasons relating to the borrowers financial difficulty that the Group would not otherwise consider;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) | it becomes probable that the borrower will enter bankruptcy or other financial reorganization;
| | -- | ----------------------------------------------------------------------------------------------



| | e) | the disappearance of an active market for that financial asset because of financial difficulties; or
| | -- | ----------------------------------------------------------------------------------------------------



| | f) | observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets,
although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | i. | adverse changes in the payment status of borrowers in the portfolio;
| | -- | --------------------------------------------------------------------



| | ii. | national or local economic conditions that correlate with defaults on the assets in the portfolio.
| | --- | --------------------------------------------------------------------------------------------------

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and
individually or collectively for financial assets that are not individually significant (i.e. individually insignificant). If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and includes these performing assets under the collective incurred but not reported (IBNR) assessment. An IBNR impairment
provision represents an interim step pending the identification of impairment losses on an individual asset in a group of financial assets. As soon as information is available that specifically identifies losses on individually impaired assets in a
group, those assets are removed from the group. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

For loans and receivables and assets held to maturity, the amount of impairment loss is measured as the difference between the assets carrying
amount and the present value of estimated future cash flows discounted at the assets original effective interest rate.



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Accounting policies - (Continued)

12 Impairment of financial assets(continued)



The amount of the loss is recognized using an allowance account and the amount of the loss is included in the income
statement.

The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash
flows that may result from foreclosure costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the
purpose of collective evaluation of impairment (individually insignificant impaired assets and IBNR) financial assets are grouped on the basis of similar risk characteristics. These characteristics are relevant to the estimation of future cash flows
for groups of such assets by being indicative of the counterpartys ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for
assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical
loss experience is based and to remove the effects of conditions in the historical period that do not currently exist.

The methodology and
assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

Following impairment, interest income is recognized using the original effective rate of interest which was used to discount the future cash flows for the purpose of measuring the impairment loss. If, in a subsequent
period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed by adjusting the allowance account. The
amount of the reversal is recognised in the income statement.

When a loan has been subjected to a specific provision and the prospects of
recovery do not improve, a time will come when it may be concluded that there is no real prospect of recovery. When this point is reached, the amount of the loan which is considered to be beyond the prospect of recovery is written off against the
related provision for loan impairment. Subsequent recoveries of amounts previously written off decrease the amount of the provision for loan impairment in the income statement.

Assets acquired in exchange for loans and receivables in order to achieve an orderly realization are accounted for as a disposal of the loan and an
acquisition of an asset. Any further impairment of the assets or business acquired is treated as an impairment of the relevant asset and not as an impairment of the original instrument.

In the case of equity instruments classified as available for sale, a significant or prolonged decline in the fair value of the instrument below its cost
is considered in determining whether impairment exists. Where such evidence exists, the cumulative net loss that had been previously recognized directly in equity is removed from equity and recognised in the income statement. Reversals of impairment
of equity shares are not recognized in the income statement and increases in the fair value of equity shares after impairment are recognized directly in equity.

In the case of debt instruments classified as available for sale, impairment is assessed based on the same criteria as all other financial assets. Reversals of impairment of debt securities are recognized in the
income statement.

13 Employee benefits

Retirement
benefit obligations

The Group provides employees with post retirement benefits mainly in the form of pensions.

The Group provides a number of defined benefit and defined contribution retirement benefit schemes. In addition, the Group contributes, according to
local law in the various countries in which it operates, to Governmental and other plans which have the characteristics of defined contribution plans. The majority of the defined benefit schemes are funded.

Full actuarial valuations of defined benefit schemes are undertaken every three years and are updated to reflect current conditions at each balance sheet
date. Scheme assets are valued at fair value determined by using current bid prices. Scheme liabilities are measured on an actuarial basis using the projected unit credit method and discounted at the current rate of return on a high quality
corporate bond of equivalent term and currency to the liability. The difference between the fair value of the plan assets and the present value of the defined benefit obligation at the balance sheet date is recognised in the balance sheet. Schemes
in surplus are shown as assets and schemes in deficit, together with unfunded schemes are shown as liabilities. Actuarial gains and losses are recognised immediately in the statement of recognised income and expense.

The cost of providing defined benefit pension schemes to employees, comprising the current service cost, past service cost, the expected return on plan
assets and the change in the present value of scheme liabilities arising from the passage of time is charged to the income statement within employee expenses.

The costs of the Groups defined contribution schemes, are charged to the income statement in the accounting period in which they are incurred. Any contributions unpaid at the balance sheet date are included as a
liability. The Group has no further obligation under these plans once these contributions have been paid.



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Accounting policies - (Continued)

13 Employee benefits(continued)



Short-term employee benefits

Short-term employee benefits, such as salaries and other benefits, are accounted for on an accruals basis over the period during which employees have provided services. Bonuses are recognized to the extent that the
Group has a present obligation to its employees that can be measured reliably. The cost of providing subsidised staff loans and preferential rates on staff deposits is charged within employee expenses.

Share based compensation

The Group operates a number of share based
compensation plans. For grants of options after November 7, 2002, the fair value of the employee services received is measured by reference to the fair value of the shares or share options granted on the date of the grant. The cost of the
employee services received in exchange for the shares or share options granted is recognized in the income statement over the period during which the employees become unconditionally entitled to the options, which is the vesting period. The amount
expensed is determined by reference to the fair value of the options granted. The fair value of the options granted is determined using option pricing models, which take into account the exercise price of the option, the share price at date of grant
of the option, the risk free interest rate, the expected volatility of the share price over the life of the option and other relevant factors. Vesting conditions included in the terms of the grant are not taken into account in estimating fair value
except where those terms relate to market conditions. Non-market vesting conditions are taken into account by adjusting the number of shares or share options included in the measurement of the cost of employee services so that ultimately, the amount
recognised in the income statement reflects the number of vested shares or share options. Where vesting conditions are related to market conditions, the charges for the services received are recognised regardless of whether or not the market related
vesting condition is met, provided that the non-market vesting conditions are met.

The expense related to share based payments is credited
to shareholders equity. Where the share based payment arrangements give rise to the issue of new shares, the proceeds of issue of the shares are credited to share capital (nominal amount) and share premium when the options are exercized. When
the share based payments give rise to the reissue of shares from treasury shares, the proceeds of issue are credited to shareholders equity. In addition, there is a transfer between the share based payment reserve and profit and loss account,
reflecting the cost of the share based payment recognized in the income statement.

14 Non-credit risk provisions

Provisions are recognized for present legal or constructive obligations arising as consequences of past events where it is probable that a transfer of economic benefit
will be necessary to settle the obligation, and it can be reliably estimated.

When the effect is material, provisions are determined by
discounting expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Payments are deducted from the present value of the provision and interest at the relevant discount rates is charged annually to interest expense.
Changes in the present value of the liability as a result of movements in interest rates are included in other financial income. The present value of provisions is included in other liabilities.

When a leasehold property ceases to be used in the business, provision is made where the unavoidable costs of the future obligations relating to the
lease are expected to exceed anticipated income. The provision is calculated using market rates of interest to reflect the long-term nature of the cash flows.

Restructuring costs

Where the Group has a formal plan for restructuring a business and has raised valid expectations in the areas affected
by the restructuring, by starting to implement the plan or announcing its main features, provision is made for the anticipated cost of restructuring, including retirement benefits and redundancy costs, when an obligation exists. The provision raised
is normally utilised within twelve months. Future operating costs are not provided for.

Legal claims and other contingencies

Provisions are made for legal claims where the Group has a present legal or constructive obligation as a result of past events and it is more likely than not that an
outflow of resources will be required to settle the obligation and the amount can be reasonably estimated.

Contingent liabilities are
possible obligations whose existence will be confirmed only by uncertain future events giving rise to present obligations where the transfer of economic benefit is uncertain or cannot be reliably measured. Contingent liabilities are not recognised
but are disclosed in the notes to the financial statements unless they are remote.



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ALLIED IRISH BANKS, p.l.c.

Accounting policies - (Continued)



15 Income tax, including deferred income tax

Income tax comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted at the balance sheet date and any adjustment to tax payable in respect of previous years. Income tax recoverable on tax
allowable losses is recognised as an asset only to the extent that it is regarded as recoverable by offset against current or future taxable profits.

Deferred income tax is provided, using the balance sheet liability method, on temporary timing differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred income tax is determined using tax rates based on legislation enacted or substantially enacted at the balance sheet date and expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised where it is probable that future taxable profits will be available against which the temporary differences will be utilised.

Deferred and current tax assets and liabilities are only offset when they arise in the same tax reporting group and where there is both the legal right and the intention to settle on a net basis or to realise the
asset and settle the liability simultaneously.

The principal temporary differences arise from depreciation of property, plant and
equipment, revaluation of certain financial assets and liabilities including derivative contracts, provisions for pensions and other post retirement benefits, tax losses carried forward, and in relation to acquisitions, on the difference between the
fair values of the net assets acquired and their tax base.

Deferred income tax is provided on temporary differences arising from
investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable future. In addition, the following
temporary differences are not provided for: goodwill not deductible for tax purposes and the initial recognition of assets and liabilities that affect neither accounting nor taxable profit.

Income tax payable on profits, based on the applicable tax law in each jurisdiction, is recognised as an expense in the period in which the profits
arise. The tax effects of income tax losses available for carry forward are recognised as an asset when it is probable that future taxable profits will be available against which these losses can be utilised.

Deferred tax relating to items that are charged or credited to equity, is charged or credited directly to equity.

16 Impairment of property, plant and equipment and intangible assets

At each balance sheet date, or more frequently where events or changes in circumstances dictate, property, plant and equipment and intangible assets, are assessed for indications of impairment. If indications are present, these assets are
subject to an impairment review. Goodwill is subject to an impairment review as at the balance sheet date each year. The impairment review comprises a comparison of the carrying amount of the asset, or its cash generating unit, with its recoverable
amount. The recoverable amount is determined as the higher of the net selling price of the asset and its value in use. Net selling price is calculated by reference to the amount at which the asset could be disposed of in an arms length
transaction evidenced by an active market or recent transactions for similar assets. Value in use is calculated by discounting the expected future cash flows obtainable as a result of the assets continued use, including those resulting from
its ultimate disposal, at a market-based discount rate on a pre-tax basis.

The carrying values of property, plant and equipment and
intangible assets are written down by the amount of any impairment and this loss is recognised in the income statement in the period in which it occurs. A previously recognised impairment loss relating to a fixed asset may be reversed in part or in
full when this is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the assets recoverable amount. The carrying amount of the asset will only be increased up to the amount
that it would have been had the original impairment not been recognised. Impairment losses on goodwill are not reversed. For the purpose of conducting impairment reviews in respect of goodwill, the recoverable amount is determined as the higher of
the net selling price of the cash-generating unit and its value in use. Cash-generating units are the lowest level at which management monitors the return on investment in assets.

17 Construction contracts

Revenue from construction contacts is recognised when it is probable that the economic
benefits of the transaction will flow to the Group and when the revenue, the costs, (both incurred and in the future), the outcome of the contract and its stage of completion can all be measured reliably. Once the above criteria are met, both
contract revenue and contract costs are recognised by reference to the stage of completion of the contract.

When the outcome of a
construction contract cannot be estimated reliably, no profit is recognised, but revenue is recognised to the extent of costs incurred that are probable of recovery. Costs are recognised as an expense in the income statement in the accounting period
in which the work is performed.

18 Non-current assets held for sale and discontinued operations

A non-current asset or a group of assets containing a non-current asset (a disposal group) is classified as held for sale if its carrying amount will be recovered
principally through sale rather than through continuing use, it is available for immediate sale and sale is highly probable within one year.

On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying amount and fair value less costs to sell with any adjustments taken to profit or loss. The same applies to
gains and losses on subsequent remeasurement. No reclassifications are made in respect of prior periods.



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ALLIED IRISH BANKS, p.l.c.

Accounting policies - (Continued)

18 Non-current assets held for sale and discontinued
operations(continued)



A discontinued operation is a component of the Groups business that represents a separate major
line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the criteria to be classified as held for sale.

Discontinued operations are presented on the income statement (including comparatives) as a separate amount, comprising the total of the post tax profit
or loss of the discontinued operations for the period together with any post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on disposal of the assets/disposal groups constituting discontinued operations.

19 Collateral & netting

The Group enters
into master agreements with counterparties, to ensure that if an event of default occurs, all amounts outstanding with those counterparties will be settled on a net basis.

Collateral

The Group obtains collateral in respect of customer liabilities where this is considered appropriate. The
collateral normally takes the form of a lien over the customers assets and gives the Group a claim on these assets for both existing and future liabilities. The collateral is, in general, not recorded on the Group balance sheet.

The Group also receives collateral in the form of cash or securities in respect of other credit instruments, such as stock borrowing contracts, and
derivative contracts in order to reduce credit risk. Collateral received in the form of securities is not recorded on the balance sheet. Collateral received in the form of cash is recorded on the balance sheet with a corresponding liability or
asset. These items are assigned to deposits received from banks or other counterparties in the case of cash collateral received. Any interest payable or receivable arising is recorded as interest expense or interest income respectively.

In certain circumstances, the Group will pledge collateral in respect of liabilities or borrowings. Collateral pledged in the form of securities or
loans and receivables continues to be recorded on the balance sheet. Collateral paid away in the form of cash is recorded in loans and advances to banks or customers. Any interest payable or receivable arising is recorded as interest expense or
interest income respectively.

Netting

Financial
assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to set off the recognised amounts and there is an intention to settle on a net basis, or to
realise an asset and settle the liability simultaneously. This is not generally the case with master agreements, and the related assets and liabilities are presented gross in the balance sheet.

20 Financial guarantees

Financial guarantees are given to banks,
financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities (facility guarantees), and to other parties in connection with the performance of customers under obligations related
to contracts, advance payments made by other parties, tenders, retentions and the payment of import duties. Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee is given. Subsequent
to initial recognition, the banks liabilities under such guarantees are measured at the higher of the initial measurement, less amortisation calculated to recognise in the income statement the fee income earned over the period, and the best
estimate of the expenditure required to settle any financial obligation arising as a result of the guarantees at the balance sheet date.

Any increase in the liability relating to guarantees is taken to the income statement in provisions for undrawn contractually committed facilities and guarantees.

21 Sale and repurchase agreements (including stock borrowing and lending)

Financial assets may be lent or sold
subject to a commitment to repurchase them (repos). Such securities are retained on the balance sheet when substantially all the risks and rewards of ownership remain with the Group. The liability to the counterparty is included
separately on the balance sheet as appropriate.

Similarly, when securities are purchased subject to a commitment to resell (reverse
repos), or where the Group borrows securities, but does not acquire the risks and rewards of ownership, the transactions are treated as collateralized loans, and the securities are not included in the balance sheet.

The difference between the sale and repurchase price is accrued over the life of the agreements using the effective interest method. Securities lent to
counterparties are also retained in the financial statements.

Securities borrowed are not recognised in the financial statements, unless
these are sold to third parties, at which point the obligation to repurchase the securities is recorded as a trading liability at fair value and any subsequent gain or loss included in trading income.

22 Leases

Lessor

Assets leased to customers are classified as finance leases if the lease agreements transfer substantially all the risks and rewards of



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Accounting policies - (Continued)

22 Leases(continued)



ownership, with or without ultimate legal title. When assets are held subject to a finance lease, the present value of the lease payments, discounted at the
rate of interest implicit in the lease, is recognised as a receivable. The difference between the total payments receivable under the lease and the present value of the receivable is recognised as unearned finance income, which is allocated to
accounting periods under the pre-tax net investment method to reflect a constant periodic rate of return.

Assets leased to customers are
classified as operating leases if the lease agreements do not transfer substantially all the risks and rewards of ownership. The leased assets are included within property, plant and equipment on the Groups balance sheet and depreciation is
provided on the depreciable amount of these assets on a systematic basis over their estimated useful lives. Lease income is recognised on a straight-line basis over the period of the lease unless another systematic basis is more appropriate.

Lessee

Operating lease rentals payable are recognised
as an expense in the income statement on a straight line basis over the lease term unless another systematic basis is more appropriate.

23 Share
capital

Issued financial instruments, or their components, are classified as equity where they meet the definition of equity and confer on the holder a
residual interest in the assets of the Group.

Share issue costs

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Dividends on ordinary shares

Dividends on ordinary shares are recognised in equity in the period in which they are
approved by the Companys shareholders, or in the case of the interim dividend when it has been approved by the Board of directors. Dividends declared after the balance sheet date are disclosed in the dividends note (note 61).

Treasury shares

Where the Company or other members of
the consolidated Group purchases the Companys equity share capital, the consideration paid is deducted from total shareholders equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any
consideration received is included in shareholders equity.

24 Insurance and investment contracts

The Group has classified its Long Term Assurance business in accordance with IFRS 4 Insurance Contracts. Insurance contracts are those contracts containing
significant insurance risk. In the case of a life contract, insurance risk exists if the amount payable on the occurrence of an insured event exceeds the assets backing the contract, or could do so in certain circumstances, and the product of the
probability of the insured event occurring and the excess amount payable has commercial substance. In particular, guaranteed equity bonds which guarantee a return of the original premium irrespective of the current value of the backing assets are
deemed to be insurance contracts notwithstanding that at the balance sheet date there may be no excess of the original premium over the backing assets. Investment contracts are contracts that do not have significant insurance risk. There are no
contracts with discretionary participating features.

Insurance contracts

The Group accounts for its insurance contracts using the embedded value basis. The embedded value comprises two components: the net assets attributable to the Group and the present value of the in-force business
(VIF). The change in the VIF before tax is accounted for as revenue. The value is estimated as the net present value of future cash flows attributable to the Group before tax, based on the market value of the assets at the balance sheet
date, using assumptions that reflect experience and a long-term outlook for the economy and then discounting at an appropriate risk discount rate.

Insurance contract liabilities are calculated on the modified statutory basis. Premiums are recognised as revenue when due from the policyholder. Claims, which together with the increase in insurance contract liabilities are recognised in
the income statement as they arise, are the cost of all claims arising during the period.

Investment contracts

Investment contracts are primarily unit-linked. Unit linked liabilities are deemed equal to the value of units attaching to contracts at the balance sheet date. The
liability is measured at fair value, which is the bid value of the assets held to match the liability, less an amount in respect of tax. Increases in investment contract liabilities are recognised in the income statement as they arise. Revenue in
relation to investment management services is recognised as the services are provided. Certain upfront fees and charges have been deferred and are recognised as income over the life of the contract. Premiums and claims are accounted for directly in
the balance sheet as adjustments to the investment contract liability.



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Accounting policies - (Continued)



25 Segment reporting

Business segments are distinguishable components of the Group that provide products or services that are subject to risks and rewards that are different to those of other business segments. Geographical segments provide products or services
within a particular economic environment that is subject to risks and rewards that are different to those of components operating in other economic environments. The Group has determined that business segments are the primary reporting segments.

26 Cash and cash equivalents

For the purposes of the
cash flow statement, cash comprises cash on hand and demand deposits, and cash equivalents comprise highly liquid investments that are convertible into cash with an insignificant risk of changes in value and with original maturities of less than
three months.

27 Trust activities

The Group commonly
acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from the
financial statements, as they are not assets of the Group.

28 Prospective accounting changes

The following standards/amendments to standards have been approved by the IASB, and were adopted by the EU in January 2006 but not early adopted by the Group. These will
be adopted in 2006 and thereafter:-Amendment to IAS 1 - Capital disclosures (effective January 1, 2007). This amendment requires disclosure, both quantitative and qualitative, of an entitys objectives, policies and processes for managing
capital. The impact is not expected to be material in terms of Group reporting.

Amendments to IAS 39 - Cash Flow Hedge Accounting of
Forecast Intragroup transactions (effective January 1, 2006). This amendment, which is not expected to have a material impact on Group reporting, will allow the foreign currency risk of intragroup monetary items qualify as the hedge item in
certain circumstances in the consolidated financial statements.

Amendments to IAS 39 and IFRS 4: Financial Guarantee Contracts (effective
January 1, 2006). This amendment will be adopted by the Group in the accounting period commencing on 1 January 2006 and requires financial guarantee contracts to be accounted for as financial instruments under IAS 39 unless they have been
explicitly dealt with as insurance contracts in the past in which case the previous accounting may continue. This standard is not expected to have a material impact on the Group.

IFRS 7 - Financial Instrument disclosures (effective January 1, 2007). This standard updates and augments the disclosure requirements of IAS 30, IAS
32 and IFRS 4 and will require additional disclosures relating to risk management policies and processes.

The Group has taken advantage of the
transitional arrangements of IFRS, not to restate corresponding amounts in accordance with the above policies on Financial assets; Financial liabilities; Derivatives and hedge accounting; impairment of financial assets; and collateral &
netting. Comparative information was prepared under Irish GAAP and the relevant accounting policies for these are set out as follows:

Provisions
for impairment of loans and receivables

It is Group policy to make provisions for bad and doubtful debts to reflect the losses inherent in the loan
portfolio at the balance sheet date. 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.

Specific provisions are made when, in the judgment of management, the recovery of the outstanding balance is in serious
doubt. The amount of the specific provision is intended to cover the difference between the balance outstanding on the loan or advance and the estimated recoverable amount. In certain portfolios, provisions are applied to pools of loans on a formula
driven basis depending on levels of delinquency.

When a loan has been subjected to a specific provision, and the prospects for recovery do
not improve, a point will come when it may be concluded that there is no realistic prospect of recovery. When this point is reached, the amount of the loan which is considered to be beyond the prospect of recovery is written off.

General provisions are also made to cover loans which are impaired at balance sheet date, and while not specifically identified, are known from
experience to be present in any portfolio of bank advances. The Group holds general provisions at a level deemed appropriate by management taking into account a number of factors including:- the credit grading profiles and movements within credit
grades; historic loan loss rates; local and international economic climates and portfolio sector profiles/industry conditions. The level of general provisions is reviewed quarterly to ensure that it remains appropriate.

Loans and receivables to banks and customers are reported in the balance sheet having deducted the total provisions for impairment of loans and
receivables.

Loans are deemed non-performing where interest is 90 days overdue and not taken to profit (i.e. non-accrual) or where a
provision exists in anticipation of a loss. Interest is not taken to profit when recovery is doubtful.



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ALLIED IRISH BANKS, p.l.c.

Accounting policies - (Continued)



Debt securities

Debt securities held as financial fixed assets are those held on a continuing use basis by the Group and those held to hedge positions which are accounted for on a historic cost basis. These debt securities are stated in the balance sheet
at cost, adjusted for the amortisation of any premiums or discounts arising on acquisition or provisions for impairment. The amortisation of premiums and discounts is included in net interest income. Profits and losses on disposal of securities held
for investment purposes are recognised immediately in other operating income. Profits and losses on disposal of securities held for hedging purposes are amortised over the lives of the underlying transactions and included in net interest income.

Debt securities held for trading purposes are stated in the balance sheet at market value. Both realised and unrealized profits on trading
securities are taken directly to the profit and loss account and included within dealing profits.

Equity shares

Equity shares intended to be held on a continuing basis are classified as financial fixed assets and included in the balance sheet at cost less provision for any
impairment. Profits and losses on disposal of equity shares held as financial fixed assets are recognised immediately in the profit and loss account. Equity shares held for trading purposes are marked to market with full recognition in the profit
and loss account of changes in market value.

Derivatives

The Group uses derivatives, such as interest rate swaps, options, forward rate agreements and financial futures for trading and non-trading purposes. The accounting treatment of these derivative instruments is dependent on the purpose for
which they are entered into.

The Group maintains trading positions in a variety of financial instruments including derivatives. Trading
transactions arise as a result of activity generated by customers while others represent proprietary trading with a view to generating incremental income. Trading instruments and hedges thereof are recognised in the accounts at fair value with the
adjustment arising included in other assets and other liabilities as appropriate. Gains and losses arising from trading activities are included in dealing profits in the profit and loss account using the mark to market method of accounting. Interest
and dividend income arising together with the funding costs relating to trading activities are included in net interest income.

Non-trading derivative transactions, comprise transactions held for hedging purposes as part of the Groups risk management strategy, against assets, liabilities, positions or cash flows, themselves accounted for on an accruals basis.
The gains and losses on these instruments (arising from changes in fair value) are not recognised in the profit and loss account immediately as they arise. Derivative transactions entered into for hedging purposes are recognised in the accounts on
an accruals basis consistent with the accounting treatment of the underlying transaction or transactions being hedged. Except as described below, in respect of hedges of the income stream on Group capital, upon early termination of derivative
financial instruments, classified as hedges, any realised gain or loss is deferred and amortised to net interest income over the life of the original hedge as long as the designated assets or liabilities remain. Upon early termination of derivative
transactions classified as hedges of the income stream on Group capital, any realised gain or loss is taken to profit and loss account as it arises.

A derivative will only be classified as a hedge where it is designated as a hedge at its inception and where it is reasonably expected that the derivative substantially matches or eliminates the exposure being hedged.
Transactions designated as hedges are reviewed and where a transaction originally entered into for hedging purposes no longer represents a hedge, its value is restated at fair value and any change in value is taken to profit and loss account
immediately. Interest rate swaps, forward rate agreements and option contracts are generally used to modify the interest rate characteristics of balance sheet instruments and are linked to specific assets or groups of similar assets or specific
liabilities or groups of similar liabilities. Futures contracts are designated as hedges when they reduce risk and there is high correlation between the futures contracts and the item being hedged, both at inception and throughout the hedge period.
Amounts paid or received over the life of a futures contract are deferred and amortised over the life of the contract.



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ALLIED IRISH BANKS, p.l.c.

Consolidated Statements of Income



|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|--------------------------------------------------------- |  | ------ | ---- |  | ------------------ | ------------------------ | - | ---- |  |  | ------ | -
|                                                          |  | Notes  |      |  |                    | Years ended December 31, |  
|                                                          |  |        | 2005 |  |                    |                          |   | 2004 | 
|                                                          |  |        |      |  | (Euro in millions) |                         
|Interest income and similar income                        |  | 5      |      |  |                    | 5,151                    |   |      |  |  | 4,018  |  
|Less: interest expense                                    |  | 6      |      |  |                    | (2,621                   | ) |      |  |  | (1,946 | )
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Net interest income                                       |  |        |      |  |                    | 2,530                    |   |      |  |  | 2,072  |  
|Dividend income                                           |  | 7      |      |  |                    | 17                       |   |      |  |  | 27     |  
|Fees and commissions income                               |  |        |      |  |                    | 1,061                    |   |      |  |  | 1,067  |  
|Less: fees and commissions expense                        |  |        |      |  |                    | (145                     | ) |      |  |  | (131   | )
|Trading income                                            |  | 8      |      |  |                    | 112                      |   |      |  |  | 96     |  
|Other operating income                                    |  | 9      |      |  |                    | 72                       |   |      |  |  | 109    |  
|Other income                                              |  |        |      |  |                    | 1,117                    |   |      |  |  | 1,168  |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Total operating income                                    |  |        |      |  |                    | 3,647                    |   |      |  |  | 3,240  |  
|Administrative expenses                                   |  | 10     |      |  |                    | 1,881                    |   |      |  |  | 1,724  |  
|Depreciation of property, plant and equipment             |  | 33     |      |  |                    | 83                       |   |      |  |  | 82     |  
|Amortization/impairment of intangible assets and goodwill |  | 32     |      |  |                    | 47                       |   |      |  |  | 63     |  
|Total operating expenses                                  |  |        |      |  |                    | 2,011                    |   |      |  |  | 1,869  |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Operating income before provisions                        |  |        |      |  |                    | 1,636                    |   |      |  |  | 1,371  |  
|Provisions for impairment of loans and receivables        |  | 26     |      |  |                    | 115                      |   |      |  |  | 114    |  
|Provisions for liabilities and commitments                |  | 41     |      |  |                    | 20                       |   |      |  |  | 20     |  
|Amounts written off /(written back) financial investments |  | 11     |      |  |                    | 8                        |   |      |  |  | (1     | )
|                                                          |  |        |      |  |                    | 143                      |   |      |  |  | 133    |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Operating income                                          |  |        |      |  |                    | 1,493                    |   |      |  |  | 1,238  |  
|Share of results of associated undertakings               |  | 31     |      |  |                    | 149                      |   |      |  |  | 132    |  
|Gain on disposal of property                              |  |        |      |  |                    | 14                       |   |      |  |  | 9      |  
|Construction contract income                              |  | 12     |      |  |                    | 45                       |   |      |  |  |       |  
|Gain on disposal of businesses                            |  | 15     |      |  |                    | 5                        |   |      |  |  | 17     |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Income before taxes - continuing operations               |  |        |      |  |                    | 1,706                    |   |      |  |  | 1,396  |  
|Applicable taxes                                          |  | 16     |      |  |                    | 319                      |   |      |  |  | 270    |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Income after taxes - continuing operations                |  | 2 & 35 |      |  |                    | 1,387                    |   |      |  |  | 1,126  |  
|Discontinued operation, net of taxation                   |  |        |      |  |                    | 46                       |   |      |  |  | 53     |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Net income for the period                                 |  |        |      |  |                    | 1,433                    |   |      |  |  | 1,179  |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Attributable to:                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Equity holders of the parent                              |  |        |      |  |                    | 1,343                    |   |      |  |  | 1,150  |  
|Minority interests in subsidiaries                        |  | 17     |      |  |                    | 90                       |   |      |  |  | 29     |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|                                                          |  |        |      |  |                    | 1,433                    |   |      |  |  | 1,179  |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Basic earnings per share - continuing operations          |  |        |      |  |                    | 145.7c                   |   |      |  |  | 128.3c |  
|Basic earnings per share - discontinued operations        |  |        |      |  |                    | 5.3c                     |   |      |  |  | 6.2c   |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Total                                                     |  | 20(a)  |      |  |                    | 151.0c                   |   |      |  |  | 134.5c |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Diluted earnings per share - continuing operations        |  |        |      |  |                    | 144.6c                   |   |      |  |  | 127.8c |  
|Diluted earnings per share - discontinued operations      |  |        |      |  |                    | 5.2c                     |   |      |  |  | 6.2c   |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  
|Total                                                     |  | 20(b)  |      |  |                    | 149.8c                   |   |      |  |  | 134.0c |  
|                                                          |  |        |      |  |                    |                          |   |      |  |  |        |  

The results for the year ended December 31, 2004 have been restated to represent the results of Ark Life
as a discontinued operation (note 2) and the application of International Financial Reporting Standards, with the exception of IAS 32, IAS 39 and IFRS 4 which apply with effect from January 1, 2005. See First time adoption of International
Financial Reporting Standards (IFRS).

The accompanying notes are an integral part of these consolidated financial
statements.



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ALLIED IRISH BANKS, p.l.c.

Consolidated Balance Sheets



|                                                                                                                                       |                    |        |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  
|-------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------ |  |  |  | ----------------- | - |  |  |  | --------------- | - |  |  |  | ----------------- | -
|                                                                                                                                       |                    | Notes  |  |  |  | December 31, 2005 |   |  |  |  | January 1, 2005 |   |  |  |  | December 31, 2004 |  
|                                                                                                                                       |                    |        |  |  |  |                  
|                                                                                                                                       | (Euro in millions) |       
|ASSETS                                                                                                                                 |                    |        |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  
|Cash and balances at central banks                                                                                                     |                    |        |  |  |  | 742               |   |  |  |  | 887             |   |  |  |  | 887               |  
|Treasury bills and other eligible bills                                                                                                |                    | 22     |  |  |  | 201               |   |  |  |  |                |   |  |  |  |                  |  
|Items in course of collection                                                                                                          |                    |        |  |  |  | 402               |   |  |  |  | 368             |   |  |  |  | 368               |  
|Trading portfolio financial assets                                                                                                     |                    | 23     |  |  |  | 10,113            |   |  |  |  | 7,957           |   |  |  |  |                  |  
|Financial assets designated at fair value through profit or loss                                                                       |                    | 24     |  |  |  |                  |   |  |  |  | 1,871           |   |  |  |  |                  |  
|Derivative financial instruments                                                                                                       |                    | 49     |  |  |  | 2,439             |   |  |  |  | 2,581           |   |  |  |  |                  |  
|Loans and receivables to banks                                                                                                         |                    | 25     |  |  |  | 7,129             |   |  |  |  | 2,538           |   |  |  |  | 2,540             |  
|Gross loans and receivables to customers                                                                                               |                    | 26     |  |  |  | 86,049            |   |  |  |  | 66,435          |   |  |  |  | 65,625            |  
|Allowance for loan losses                                                                                                              |                    |        |  |  |  | (674              | ) |  |  |  | (614            | ) |  |  |  | (758              | )
|Unearned interest                                                                                                                      |                    |        |  |  |  | (143              | ) |  |  |  | (129            | ) |  |  |  | (129              | )
|Loans and receivables to customers net                                                                                                 |                    |        |  |  |  | 85,232            |   |  |  |  | 65,692          |   |  |  |  | 64,738            |  
|Financial investments available for sale                                                                                               |                    | 28     |  |  |  | 16,864            |   |  |  |  | 15,720          |   |  |  |  |                  |  
|Debt securities                                                                                                                        |                    | 29     |  |  |  |                  |   |  |  |  |                |   |  |  |  | 24,501            |  
|Equity shares                                                                                                                          |                    | 30     |  |  |  |                  |   |  |  |  |                |   |  |  |  | 1,641             |  
|Interests in associated undertakings                                                                                                   |                    | 31     |  |  |  | 1,656             |   |  |  |  | 1,395           |   |  |  |  | 1,379             |  
|Intangible assets and goodwill                                                                                                         |                    | 32     |  |  |  | 517               |   |  |  |  | 540             |   |  |  |  | 540               |  
|Property, plant and equipment                                                                                                          |                    | 33     |  |  |  | 706               |   |  |  |  | 745             |   |  |  |  | 745               |  
|Other assets                                                                                                                           |                    |        |  |  |  | 778               |   |  |  |  | 1,435           |   |  |  |  | 2,597             |  
|Current taxation                                                                                                                       |                    |        |  |  |  | 18                |   |  |  |  | 25              |   |  |  |  | 25                |  
|Deferred taxation                                                                                                                      |                    | 34     |  |  |  | 253               |   |  |  |  | 204             |   |  |  |  | 228               |  
|Prepayments and accrued income                                                                                                         |                    |        |  |  |  | 801               |   |  |  |  | 861             |   |  |  |  | 920               |  
|Disposal group and assets classified as held for sale                                                                                  |                    | 2 & 35 |  |  |  | 5,363             |   |  |  |  |                |   |  |  |  |                  |  
|                                                                                                                                       |                    |        |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  
|                                                                                                                                       |                    |        |  |  |  | 133,214           |   |  |  |  | 102,819         |   |  |  |  | 101,109           |  
|                                                                                                                                       |                    |        |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                   |                    |        |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  
|Deposits by banks                                                                                                                      |                    | 36     |  |  |  | 29,329            |   |  |  |  | 20,428          |   |  |  |  | 20,428            |  
|Customer accounts                                                                                                                      |                    | 37     |  |  |  | 62,580            |   |  |  |  | 50,151          |   |  |  |  | 50,151            |  
|Trading portfolio financial liabilities                                                                                                |                    | 38     |  |  |  | 240               |   |  |  |  | 332             |   |  |  |  |                  |  
|Derivative financial instruments                                                                                                       |                    | 49     |  |  |  | 1,967             |   |  |  |  | 2,541           |   |  |  |  |                  |  
|Investment and insurance contract liabilities                                                                                          |                    | 35     |  |  |  |                  |   |  |  |  | 3,887           |   |  |  |  | 3,286             |  
|Debt securities in issue                                                                                                               |                    | 39     |  |  |  | 17,611            |   |  |  |  | 11,805          |   |  |  |  | 11,805            |  
|Current taxation                                                                                                                       |                    |        |  |  |  | 133               |   |  |  |  | 197             |   |  |  |  | 175               |  
|Other liabilities                                                                                                                      |                    | 40     |  |  |  | 1,599             |   |  |  |  | 1,593           |   |  |  |  | 3,387             |  
|Accruals and deferred income                                                                                                           |                    |        |  |  |  | 1,092             |   |  |  |  | 705             |   |  |  |  | 913               |  
|Retirement benefit liabilities                                                                                                         |                    | 14     |  |  |  | 1,227             |   |  |  |  | 886             |   |  |  |  | 886               |  
|Provisions for liabilities and commitments                                                                                             |                    | 41     |  |  |  | 140               |   |  |  |  | 122             |   |  |  |  | 122               |  
|Deferred taxation                                                                                                                      |                    | 34     |  |  |  | 32                |   |  |  |  | 38              |   |  |  |  | 52                |  
|Subordinated liabilities and other capital instruments                                                                                 |                    | 42     |  |  |  | 3,756             |   |  |  |  | 2,451           |   |  |  |  | 2,766             |  
|Disposal group classified as held for sale                                                                                             |                    | 2 & 35 |  |  |  | 5,091             |   |  |  |  |                |   |  |  |  |                  |  
|Memorandum items: contingent liabilities and commitments                                                                               |                    | 48     |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  
|Stockholders equity                                                                                                                   |                    |        |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  
|Ordinary shares of 0.32 each: 1,160 million authorized (2004: 1,160 million), 918.4 million issued
and outstanding as at December 31, |                    |        |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  
|2005 and 2004 respectively                                                                                                             |                    | 45     |  |  |  | 294               |   |  |  |  | 294             |   |  |  |  | 294               |  
|Share premium account                                                                                                                  |                    |        |  |  |  | 1,693             |   |  |  |  | 1,693           |   |  |  |  | 1,693             |  
|Other equity interests                                                                                                                 |                    | 44     |  |  |  | 497               |   |  |  |  | 497             |   |  |  |  | 182               |  
|Reserves                                                                                                                               |                    |        |  |  |  | 1,152             |   |  |  |  | 1,190           |   |  |  |  | 985               |  
|Profit and loss account                                                                                                                |                    |        |  |  |  | 3,533             |   |  |  |  | 2,798           |   |  |  |  | 2,773             |  
|Total stockholders funds                                                                                                              |                    |        |  |  |  | 7,169             |   |  |  |  | 6,472           |   |  |  |  | 5,927             |  
|Minority interests in subsidiaries                                                                                                     |                    | 43     |  |  |  | 1,248             |   |  |  |  | 1,211           |   |  |  |  | 1,211             |  
|                                                                                                                                       |                    |        |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  
|                                                                                                                                       |                    |        |  |  |  | 133,214           |   |  |  |  | 102,819         |   |  |  |  | 101,109           |  
|                                                                                                                                       |                    |        |  |  |  |                   |   |  |  |  |                 |   |  |  |  |                   |  

The financial position as at December 31, 2004 has been restated to reflect the application of
International Financial Reporting Standards, with the exception of IAS 32, IAS 39 and IFRS 4 which apply with effect from January 1, 2005. See First time adoption of International Financial Reporting Standards (IFRS).

The accompanying notes are an integral part of these consolidated financial statements.



102



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##### Table of Contents

Consolidated reconciliation of movements in stockholders equity



|                                                       |  |                    |  |              |   |  |                 |   |  |                     |   |  |                      |   |  |                |   |  |                 |   |  |                            |  |                                     |   |  |                         |   |  |                            |   |  |       |  
|------------------------------------------------------ |  | ------------------ |  | ------------ | - |  | --------------- | - |  | ------------------- | - |  | -------------------- | - |  | -------------- | - |  | --------------- | - |  | -------------------------- |  | ----------------------------------- | - |  | ----------------------- | - |  | -------------------------- | - |  | ----- | -
|                                                       |  | Sharecapital       |  | Sharepremium |   |  | Capitalreserves |   |  | Revaluationreserves |   |  | Otherequityinterests |   |  | Treasuryshares |   |  | Revenuereserves |   |  | Sharebasedpaymentsreserves |  | Availablefor salesecuritiesreserves |   |  | Cash flowhedgingreserve |   |  | Foreigncurrencytranslation |   |  | Total |  
|                                                       |  | (Euro in millions) | 
|2004                                                   |  |                    |  |              |   |  |                 |   |  |                     |   |  |                      |   |  |                |   |  |                 |   |  |                            |  |                                     |   |  |                         |   |  |                            |   |  |       |  
|Balance January 1, 2004 (Irish GAAP)                   |  | 290                |  | 1,694        |   |  | 838             |   |  | 113                 |   |  | 196                  |   |  | (757           | ) |  | 2,764           |   |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | 5,138 |  
|IFRS transition adjustment                             |  |                   |  |             |   |  |                |   |  | (24                 | ) |  |                     |   |  |               |   |  | 223             |   |  | 9                          |  |                                    |   |  |                        |   |  |                           |   |  | 208   |  
|                                                       |  |                    |  |              |   |  |                 |   |  |                     |   |  |                      |   |  |                |   |  |                 |   |  |                            |  |                                     |   |  |                         |   |  |                            |   |  |       |  
|Balance January 1, 2004 (IFRS)                         |  | 290                |  | 1,694        |   |  | 838             |   |  | 89                  |   |  | 196                  |   |  | (757           | ) |  | 2,987           |   |  | 9                          |  |                                    |   |  |                        |   |  |                           |   |  | 5,346 |  
|Income attributable to equity holders of the parent    |  |                   |  |             |   |  | 59              |   |  |                    |   |  |                     |   |  |               |   |  | 1,070           |   |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | 1,129 |  
|Dividends on ordinary shares                           |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  | (475            | ) |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | (475  | )
|Dividends on other equity interests                    |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  | (4              | ) |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | (4    | )
|Share based payments                                   |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  |                |   |  | 5                          |  |                                    |   |  |                        |   |  |                           |   |  | 5     |  
|Actuarial loss recognized in retirement benefit plans  |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  | (198            | ) |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | (198  | )
|Other recognized (losses)/gains relating to the period |  |                   |  | (1           | ) |  |                |   |  | (1                  | ) |  | (14                  | ) |  |               |   |  | 28              |   |  |                           |  |                                    |   |  |                        |   |  | (73                        | ) |  | (61   | )
|Ordinary shares issued in lieu of cash dividend        |  | 4                  |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  | 130             |   |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | 134   |  
|Other ordinary shares issued                           |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  | 71             |   |  |                |   |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | 71    |  
|Net movement in own shares                             |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  | (20             | ) |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | (20   | )
|                                                       |  |                    |  |              |   |  |                 |   |  |                     |   |  |                      |   |  |                |   |  |                 |   |  |                            |  |                                     |   |  |                         |   |  |                            |   |  |       |  
|Balance December 31, 2004                              |  | 294                |  | 1,693        |   |  | 897             |   |  | 88                  |   |  | 182                  |   |  | (686           | ) |  | 3,518           |   |  | 14                         |  |                                    |   |  |                        |   |  | (73                        | ) |  | 5,927 |  
|                                                       |  |                    |  |              |   |  |                 |   |  |                     |   |  |                      |   |  |                |   |  |                 |   |  |                            |  |                                     |   |  |                         |   |  |                            |   |  |       |  
|2005                                                   |  |                    |  |              |   |  |                 |   |  |                     |   |  |                      |   |  |                |   |  |                 |   |  |                            |  |                                     |   |  |                         |   |  |                            |   |  |       |  
|Balance December 31, 2004                              |  | 294                |  | 1,693        |   |  | 897             |   |  | 88                  |   |  | 182                  |   |  | (686           | ) |  | 3,518           |   |  | 14                         |  |                                    |   |  |                        |   |  | (73                        | ) |  | 5,927 |  
|IFRS transition adjustment                             |  |                   |  |             |   |  | (185            | ) |  |                    |   |  | 315                  |   |  |               |   |  | 25              |   |  |                           |  | 136                                 |   |  | 254                     |   |  |                           |   |  | 545   |  
|                                                       |  |                    |  |              |   |  |                 |   |  |                     |   |  |                      |   |  |                |   |  |                 |   |  |                            |  |                                     |   |  |                         |   |  |                            |   |  |       |  
|Balance January 1, 2005                                |  | 294                |  | 1,693        |   |  | 712             |   |  | 88                  |   |  | 497                  |   |  | (686           | ) |  | 3,543           |   |  | 14                         |  | 136                                 |   |  | 254                     |   |  | (73                        | ) |  | 6,472 |  
|Income attributable to equity holders of the parent    |  |                   |  |             |   |  | 46              |   |  |                    |   |  |                     |   |  |               |   |  | 1,297           |   |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | 1,343 |  
|Dividends on ordinary shares                           |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  | (532            | ) |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | (532  | )
|Dividends on other equity interests                    |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  | (38             | ) |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | (38   | )
|Share based payments                                   |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  |                |   |  | 16                         |  |                                    |   |  |                        |   |  |                           |   |  | 16    |  
|Actuarial loss recognized in retirement benefit plans  |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  | (285            | ) |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | (285  | )
|Other recognized (losses)/gains relating to the period |  |                   |  |             |   |  |                |   |  | (3                  | ) |  |                     |   |  |               |   |  | (69             | ) |  |                           |  | (6                                  | ) |  | (76                     | ) |  | 287                        |   |  | 133   |  
|Other ordinary shares issued                           |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  | 66             |   |  |                |   |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | 66    |  
|Net movement in own shares                             |  |                   |  |             |   |  |                |   |  |                    |   |  |                     |   |  |               |   |  | (6              | ) |  |                           |  |                                    |   |  |                        |   |  |                           |   |  | (6    | )
|                                                       |  |                    |  |              |   |  |                 |   |  |                     |   |  |                      |   |  |                |   |  |                 |   |  |                            |  |                                     |   |  |                         |   |  |                            |   |  |       |  
|Balance December 31, 2005                              |  | 294                |  | 1,693        |   |  | 758             |   |  | 85                  |   |  | 497                  |   |  | (620           | ) |  | 3,910           |   |  | 30                         |  | 130                                 |   |  | 178                     |   |  | 214                        |   |  | 7,169 |  
|                                                       |  |                    |  |              |   |  |                 |   |  |                     |   |  |                      |   |  |                |   |  |                 |   |  |                            |  |                                     |   |  |                         |   |  |                            |   |  |       |  

The accompanying notes are integral part of these consolidated financial statements.



103



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Consolidated Statement of Cash Flows



|                                                                                   |  |       |  |                          |     |  |         |  
|---------------------------------------------------------------------------------- |  | ----- |  | ------------------------ | --- |  | ------- | -
|                                                                                   |  |       |  | Years ended December 31, |    
|                                                                                   |  | Notes |  | 2005                     |     |  | 2004    |  
|                                                                                   |  |       |  | (Euro in millions)       |    
|Reconciliation of income before taxes to net cash inflow from operating activities |  |       |  |                          |     |  |         |  
|Income before taxes(1)                                                             |  |       |  | 1,754                    |     |  | 1,454   |  
|Gain on disposal of businesses                                                     |  |       |  | (5                       | )   |  | (17     | )
|Construction contract income                                                       |  |       |  | (45                      | )   |  |        |  
|Gain on disposal of property                                                       |  |       |  | (14                      | )   |  | (9      | )
|Investment income                                                                  |  |       |  | (41                      | )   |  | (37     | )
|Share of results of associated undertakings                                        |  |       |  | (149                     | )   |  | (132    | )
|Decrease/(increase) in prepayments and accrued income                              |  |       |  | 83                       |     |  | (282    | )
|Increase in accruals and deferred income                                           |  |       |  | 332                      |     |  | 369     |  
|Provisions for loan losses                                                         |  |       |  | 115                      |     |  | 114     |  
|Provisions for liabilities and commitments                                         |  |       |  | 20                       |     |  | 20      |  
|Amounts written off/(written back) financial investments                           |  |       |  | 8                        |     |  | (1      | )
|Increase in other provisions                                                       |  |       |  | 14                       |     |  | 33      |  
|Depreciation, impairment and amortization                                          |  |       |  | 130                      |     |  | 145     |  
|Interest on subordinated liabilities and other capital instruments                 |  | 132   |  |                          | 109 | 
|Gain on disposal of available for sale financial instruments                       |  |       |  | (19                      | )   |  | (17     | )
|Gain on termination of off-balance sheet instruments                               |  |       |  |                         |     |  | (36     | )
|Average gains on debt securities held for hedging purposes                         |  |       |  |                         |     |  | (2      | )
|Gain on disposal of investments in associated undertakings                         |  |       |  |                         |     |  | (1      | )
|Amortization of premiums and discounts                                             |  |       |  | 64                       |     |  | 24      |  
|Increase in long-term assurance business                                           |  |       |  | (55                      | )   |  | (62     | )
|                                                                                   |  |       |  |                          |     |  |         |  
|                                                                                   |  |       |  | 2,324                    |     |  | 1,672   |  
|                                                                                   |  |       |  |                          |     |  |         |  
|Net increase in deposits by banks                                                  |  |       |  | 8,019                    |     |  | 3,056   |  
|Net increase in customer accounts                                                  |  |       |  | 11,414                   |     |  | 6,041   |  
|Net increase in loans and receivables to customers                                 |  |       |  | (18,350                  | )   |  | (13,721 | )
|Net (increase)/decrease in loans and receivables to banks                          |  |       |  | (30                      | )   |  | 635     |  
|Net increase in trading portfolio financial assets/liabilities                     |  |       |  | (1,942                   | )   |  | (2,578  | )
|Net decrease in derivative financial instruments                                   |  |       |  | (447                     | )   |  |        |  
|Net increase in treasury bills and other eligible bills                            |  |       |  | (177                     | )   |  |        |  
|Net increase in items in course of collection                                      |  |       |  | (29                      | )   |  | (29     | )
|Net increase in debt securities in issue                                           |  |       |  | 5,223                    |     |  | 8,303   |  
|Net increase in notes in circulation                                               |  |       |  | 21                       |     |  | 30      |  
|Increase in other assets                                                           |  |       |  | (1,467                   | )   |  | (754    | )
|Increase in other liabilities                                                      |  |       |  | 419                      |     |  | 937     |  
|Effect of currency translation and other adjustments                               |  |       |  | (114                     | )   |  | 117     |  
|                                                                                   |  |       |  |                          |     |  |         |  
|Net cash inflow from operating assets and liabilities                              |  |       |  | 2,540                    |     |  | 2,037   |  
|                                                                                   |  |       |  |                          |     |  |         |  
|Net cash inflow from operating activities before taxes                             |  |       |  | 4,864                    |     |  | 3,709   |  
|Taxation paid                                                                      |  |       |  | (351                     | )   |  | (320    | )
|                                                                                   |  |       |  |                          |     |  |         |  
|Net cash inflow from operating activities                                          |  |       |  | 4,513                    |     |  | 3,389   |  
|Investing activities (note a)                                                      |  |       |  | (262                     | )   |  | (4,106  | )
|Financing activities (note b)                                                      |  |       |  | 556                      |     |  | 1,288   |  
|                                                                                   |  |       |  |                          |     |  |         |  
|Increase in cash and cash equivalents                                              |  |       |  | 4,807                    |     |  | 571     |  
|Opening cash and cash equivalents                                                  |  |       |  | 2,773                    |     |  | 2,152   |  
|Effect of currency translation adjustments                                         |  |       |  | 90                       |     |  | 50      |  
|                                                                                   |  |       |  |                          |     |  |         |  
|Closing cash and cash equivalents                                                  |  | 47    |  | 7,670                    |     |  | 2,773   |  
|                                                                                   |  |       |  |                          |     |  |         |  

The accompanying notes are integral part of these consolidated financial statements.



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ALLIED IRISH BANKS, p.l.c.

Consolidated Statement of Cash Flows



|                                                |  |                          |   |  |        |  
|----------------------------------------------- |  | ------------------------ | - |  | ------ | -
|                                                |  | Years ended December 31, |  
|                                                |  | 2005                     |   |  | 2004   |  
|                                                |  | (Euro in millions)       |  
|(a) Investing activities                        |  |                          |   |  |        |  
|Net increase in financial investments           |  | (264                     | ) |  | (4,038 | )
|Additions to property, plant and equipment      |  | (100                     | ) |  | (68    | )
|Disposal of property, plant and equipment       |  | 89                       |   |  | 20     |  
|Additions to intangible fixed assets            |  | (36                      | ) |  | (66    | )
|Investment in associated undertaking            |  | (3                       | ) |  | (7     | )
|Disposal of associated undertakings             |  | 4                        |   |  | 1      |  
|Disposal of investment in subsidiary            |  | 7                        |   |  | 15     |  
|Dividends received from associated undertakings |  | 41                       |   |  | 37     |  
|                                                |  |                          |   |  |        |  
|Cash flows from investing activities            |  | (262                     | ) |  | (4,106 | )
|                                                |  |                          |   |  |        |  
|(b) Financing activities                        |  |                          |   |  |        |  
|Issue of ordinary share capital                 |  | 47                       |   |  | 53     |  
|Redemption of subordinated liabilities          |  | (630                     | ) |  | (32    | )
|Issue of new subordinated liabilities           |  | 1,813                    |   |  | 733    |  
|Issue of preferred securities                   |  |                         |   |  | 990    |  
|Interest paid on subordinated liabilities       |  | (90                      | ) |  | (105   | )
|Equity dividends paid                           |  | (532                     | ) |  | (345   | )
|Dividends on other equity interests             |  | (38                      | ) |  | (4     | )
|Dividends paid to minority interests            |  | (14                      | ) |  | (2     | )
|                                                |  |                          |   |  |        |  
|Cash flows from financing activities            |  | 556                      |   |  | 1,288  |  
|                                                |  |                          |   |  |        |  



|(1) | Represents income before taxes  continuing activities, as per the Consolidated income
statement, adjusted for the income before taxes of Ark Life of 48 million in 2005 (2004: 58 million).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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ALLIED IRISH BANKS, p.l.c.

Statement of recognized income and expense



|                                                                                         |  |                          |   |  |       |  
|---------------------------------------------------------------------------------------- |  | ------------------------ | - |  | ----- | -
|                                                                                         |  | Years ended December 31, |  
|                                                                                         |  | 2005                     |   |  | 2004  |  
|                                                                                         |  | (Euro in millions)       |  
|Foreign exchange translation differences                                                 |  | 287                      |   |  | (73   | )
|Net change in cash flow hedges, net of tax                                               |  | (76                      | ) |  |      |  
|Net change in fair value of available for sale securities, net of tax                    |  | (6                       | ) |  |      |  
|Net actuarial gains and losses in retirement benefit schemes, net of tax                 |  | (285                     | ) |  | (198  | )
|                                                                                         |  |                          |   |  |       |  
|Income and expense recognized directly in equity                                         |  | (80                      | ) |  | (271  | )
|Income for the period                                                                    |  | 1,433                    |   |  | 1,179 |  
|                                                                                         |  |                          |   |  |       |  
|Total recognized income and expense for the period                                       |  | 1,353                    |   |  | 908   |  
|Transition adjustment at January 1, 2005 arising from IAS 32, IAS 39 and IFRS 4 (note 1) |  | 545                      |   |  |      |  
|                                                                                         |  |                          |   |  |       |  
|Total recognized income and expense for the period including transition adjustment       |  | 1,898                    |   |  | 908   |  
|                                                                                         |  |                          |   |  |       |  
|Attributable to:                                                                         |  |                          |   |  |       |  
|Equity holders of the parent                                                             |  | 1,808                    |   |  | 879   |  
|Minority interest in subsidiaries                                                        |  | 90                       |   |  | 29    |  
|                                                                                         |  |                          |   |  |       |  
|Total recognized income and expense for the period including transition adjustment       |  | 1,898                    |   |  | 908   |  
|                                                                                         |  |                          |   |  |       |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements



|1. | TRANSITION TO IFRS
|-- | ------------------

As set out in the First time
Adoption of International Financial Reporting Standards (IFRS), the financial information has been prepared based on the requirements of IFRS issued by the IASB, as adopted by the EU. AIB has availed of transitional provisions for IAS 32
Financial Instruments: Disclosure and Presentation (IAS 32), IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) and IFRS 4 Insurance Contracts (IFRS 4) and has
not presented comparative information in accordance with these standards. Accordingly, comparative information for 2004 in respect of financial instruments and insurance contracts is prepared on the basis of the Groups accounting policies
under Irish GAAP.

A description of the differences between Irish GAAP and IFRS accounting policies is set out in note 59. Reconciliations
of consolidated balance sheets prepared under Irish GAAP and IFRS at December 31, 2004 and January 1, 2005 (after the application of IAS 32, IAS 39 and IFRS 4) are included in note 59. A reconciliation of the consolidated income statement
prepared in accordance with Irish GAAP and prepared in accordance with IFRS for the year ended December 31, 2004 is included in note 59 and is summarized below.

The following table sets out the AIB Group reconciliation from previously reported Irish GAAP information for income after taxes and the reconciliation to stockholders equity at December 31, 2004 and
January 1, 2005 (after the application of IAS 32, IAS 39 and IFRS 4).



|                                                                                         |  |                    |   |  |  |  |                      |  
|---------------------------------------------------------------------------------------- |  | ------------------ | - |  |  |  | -------------------- | -
|                                                                                         |  | Income after taxes |   |  |  |  | Stockholders equity |  
|                                                                                         |  | (Euro in millions) |  
|As reported under Irish GAAP, at December 31, 2004                                       |  | 1,103              |   |  |  |  | 5,581                |  
|Reconciliation adjustments to IFRS excluding IAS 32, IAS 39 and IFRS 4:                  |  |                    |   |  |  |  |                      |  
|Associated undertakings                                                                  |  | 1                  |   |  |  |  | 12                   |  
|Finance leases                                                                           |  | 2                  |   |  |  |  | 1                    |  
|Software                                                                                 |  | 6                  |   |  |  |  | 20                   |  
|Taxation                                                                                 |  | (4                 | ) |  |  |  | (47                  | )
|Intangible assets & goodwill                                                             |  | 79                 |   |  |  |  | 79                   |  
|Dividends                                                                                |  |                   |   |  |  |  | 336                  |  
|Share based payments                                                                     |  | (9                 | ) |  |  |  | 10                   |  
|Employee benefits & other                                                                |  | 1                  |   |  |  |  | (65                  | )
|                                                                                         |  |                    |   |  |  |  |                      |  
|IFRS excluding IAS 32, IAS 39 and IFRS 4                                                 |  | 1,179              |   |  |  |  | 5,927                |  
|                                                                                         |  |                    |   |  |  |  |                      |  
|Reconciliation adjustments to IAS 32, IAS 39 and IFRS 4:                                 |  |                    |   |  |  |  |                      |  
|Loans origination                                                                        |  |                    |   |  |  |  | (65                  | )
|Loan impairment                                                                          |  |                    |   |  |  |  | 139                  |  
|Financial instruments                                                                    |  |                    |   |  |  |  | 273                  |  
|Derivatives                                                                              |  |                    |   |  |  |  | 38                   |  
|Long-term assurance business                                                             |  |                    |   |  |  |  | (185                 | )
|Financial liabilities(1)                                                                 |  |                    |   |  |  |  | 345                  |  
|                                                                                         |  |                    |   |  |  |  | 545                  |  
|                                                                                         |  |                    |   |  |  |  |                      |  
|Stockholders equity under IFRS at January 1, 2005 (including IAS 32, IAS 39 and IFRS 4) |  |                    |   |  |  |  | 6,472                |  
|                                                                                         |  |                    |   |  |  |  |                      |  



|(1) | Includes Reserve Capital Instrument (RCI) classified to equity from subordinated liabilities
of 497 million, Preference Share Capital classified from equity to subordinated liabilities of 182 million and provision for dividends written back to equity of 30 million.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|2. | DISPOSAL OF ARK LIFE ASSURANCE COMPANY LIMITED (ARK LIFE). ACQUISITION OF AN INTEREST OF 24.99% IN HIBERNIAN LIFE HOLDINGS LIMITED.
|-- | -------------------------------------------------------------------------------------------------------------------------------------

On November 22, 2005, AIB announced that it had agreed the terms of a joint venture with Aviva Group p.l.c., for the manufacture and distribution of
life and pensions products in the Republic of Ireland. The joint venture brings together Hibernian Life & Pensions Limited and Ark Life. Under the terms of the agreement, AIB will own an interest of 24.99% in the joint venture company
Hibernian Life Holdings Limited and will enter into an exclusive agreement to distribute the life and pensions products of the joint venture. As part of the transaction, AIB will receive a cash payment of up to 205.4 million. The transaction
was completed on January 30, 2006.

Under IFRS 5, Non-current assets held for sale and discontinued operations, the income
and expenses of Ark Life for December 2005 and December 2004 of the activities deemed to be disposed of have been reported net of taxation as discontinued operations below income after taxes. The impact of the December 2004 restatement on the
previously reported figures is outlined below on the Income Statement captions impacted. The assets and liabilities of Ark Life (note 35)as at December 31, 2005 have been classified as held for sale and are separate from other assets
and liabilities on the balance sheet. There has been no restatement of prior year balance sheet figures as the assets and liabilities were not held for sale at that date. There was a net decrease of cash and cash equivalents in Ark Life during 2005
of 29 million (2004: net increase 12 million). All cash flows in both periods were generated as a result of operating activities.



|                                                         |  |                       |  |                        |  |                     
|-------------------------------------------------------- |  | --------------------- |  | ---------------------- |  | --------------------
|                                                         |  | December 31, 2004    
|                                                         |  | As previouslyreported |  | Discontinuedoperations |  | Continuingoperations
|                                                         |  | (Euro in millions)   
|Net interest income                                      |  | 2,134                 |  | 62                     |  | 2,072               
|Other income                                             |  | 1,498                 |  | 330                    |  | 1,168               
|                                                         |  |                       |  |                        |  |                     
|Total operating income                                   |  | 3,632                 |  | 392                    |  | 3,240               
|Insurance and investment contract liabilities and claims |  | 309                   |  | 309                    |  |                    
|Total operating expenses                                 |  | 1,894                 |  | 25                     |  | 1,869               
|Provisions                                               |  | 133                   |  |                       |  | 133                 
|                                                         |  |                       |  |                        |  |                     
|Operating income                                         |  | 1,296                 |  | 58                     |  | 1,238               
|Share of results of associated undertakings              |  | 132                   |  |                       |  | 132                 
|Gain on disposal of property and businesses              |  | 26                    |  |                       |  | 26                  
|                                                         |  |                       |  |                        |  |                     
|Income before taxes                                      |  | 1,454                 |  | 58                     |  | 1,396               
|Applicable taxes                                         |  | 275                   |  | 5                      |  | 270                 
|                                                         |  |                       |  |                        |  |                     
|Income after taxes                                       |  | 1,179                 |  | 53                     |  | 1,126               
|                                                         |  |                       |  |                        |  |                     



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|3. | OPERATIONS BY GEOGRAPHICAL SEGMENT(1)
|-- | -------------------------------------



|                            |  |                          |  |       |  
|--------------------------- |  | ------------------------ |  | ----- | -
|                            |  | Years ended December 31, | 
|                            |  | 2005                     |  | 2004  |  
|                            |  | (Euro in millions)       | 
|Interest income             |  |                          |  |       |  
|Ireland                     |  | 3,101                    |  | 2,464 |  
|United States               |  | 139                      |  | 71    |  
|United Kingdom              |  | 1,491                    |  | 1,157 |  
|Poland                      |  | 408                      |  | 323   |  
|Rest of the World           |  | 12                       |  | 3     |  
|                            |  |                          |  |       |  
|                            |  | 5,151                    |  | 4,018 |  
|                            |  |                          |  |       |  
|Dividend income             |  |                          |  |       |  
|Ireland                     |  | 3                        |  | 13    |  
|United States               |  |                         |  |      |  
|United Kingdom              |  | 2                        |  | 2     |  
|Poland                      |  | 12                       |  | 12    |  
|Rest of the World           |  |                         |  |      |  
|                            |  |                          |  |       |  
|                            |  | 17                       |  | 27    |  
|                            |  |                          |  |       |  
|Fees and commissions income |  |                          |  |       |  
|Ireland                     |  | 587                      |  | 561   |  
|United States               |  | 70                       |  | 81    |  
|United Kingdom              |  | 182                      |  | 245   |  
|Poland                      |  | 213                      |  | 173   |  
|Rest of the World           |  | 9                        |  | 7     |  
|                            |  |                          |  |       |  
|                            |  | 1,061                    |  | 1,067 |  
|                            |  |                          |  |       |  
|Trading income              |  |                          |  |       |  
|Ireland                     |  | 9                        |  | 14    |  
|United States               |  | 4                        |  | 6     |  
|United Kingdom              |  | 84                       |  | 66    |  
|Poland                      |  | 15                       |  | 10    |  
|Rest of the World           |  |                         |  |      |  
|                            |  |                          |  |       |  
|                            |  | 112                      |  | 96    |  
|                            |  |                          |  |       |  
|Other operating income      |  |                          |  |       |  
|Ireland                     |  | 13                       |  | 95    |  
|United States               |  | 3                        |  | 15    |  
|United Kingdom              |  | 4                        |  | (40   | )
|Poland                      |  | 51                       |  | 40    |  
|Rest of the World           |  | 1                        |  | (1    | )
|                            |  |                          |  |       |  
|                            |  | 72                       |  | 109   |  
|                            |  |                          |  |       |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                                               |                    |                          |      |                |  
|---------------------------------------------- | ------------------ | ------------------------ | ---- | -------------- | -
|                                               |                    | Years ended December 31, |     
|                                               | 2005               |                          | 2004 |               
|                                               | (Euro in millions) |                         
|Gross income                                   |                    |                          |      |                |  
|Ireland                                        |                    | 2,250                    |      | 2,004          |  
|United States                                  |                    | 117                      |      | 125            |  
|United Kingdom                                 |                    | 955                      |      | 821            |  
|Poland                                         |                    | 518                      |      | 439            |  
|Rest of the World                              |                    | 16                       |      | 8              |  
|                                               |                    |                          |      |                |  
|                                               |                    | 3,856                    |      | 3,397          |  
|                                               |                    |                          |      |                |  
|Total operating expenses                       |                    |                          |      |                |  
|Ireland                                        |                    | 1,239                    |      | 1,126          |  
|United States                                  |                    | 62                       |      | 81             |  
|United Kingdom                                 |                    | 413                      |      | 392            |  
|Poland                                         |                    | 290                      |      | 266            |  
|Rest of the World                              |                    | 7                        |      | 4              |  
|                                               |                    |                          |      |                |  
|                                               |                    | 2,011                    |      | 1,869          |  
|                                               |                    |                          |      |                |  
|Provisions                                     |                    |                          |      |                |  
|Ireland                                        |                    | 70                       |      | 70             |  
|United States                                  |                    | 1                        |      | (4             | )
|United Kingdom                                 |                    | 54                       |      | 38             |  
|Poland                                         |                    | 15                       |      | 29             |  
|Rest of the World                              |                    | 3                        |      |               |  
|                                               |                    |                          |      |                |  
|                                               |                    | 143                      |      | 133            |  
|                                               |                    |                          |      |                |  
|Income before taxes - continuing operations(2) |                    |                          |      |                |  
|Ireland                                        |                    | 850                      |      | 726            |  
|United States                                  |                    | 202                      |      | 174            |  
|United Kingdom                                 |                    | 477                      |      | 377            |  
|Poland                                         |                    | 171                      |      | 115            |  
|Rest of the World                              |                    | 6                        |      | 4              |  
|                                               |                    |                          |      |                |  
|                                               |                    | 1,706                    |      | 1,396          |  
|                                               |                    |                          |      |                |  
|                                               |                    |                         
|                                               |                    | December 31,2005         |      | January 1,2005 |  
|                                               |                    | (Euro in millions)       |     
|Total assets                                   |                    |                          |      |                |  
|Ireland                                        |                    | 91,622                   |      | 70,484         |  
|United States                                  |                    | 5,071                    |      | 2,568          |  
|United Kingdom                                 |                    | 28,411                   |      | 22,885         |  
|Poland                                         |                    | 7,815                    |      | 6,761          |  
|Rest of the World                              |                    | 295                      |      | 121            |  
|                                               |                    |                          |      |                |  
|                                               |                    | 133,214                  |      | 102,819        |  
|                                               |                    |                          |      |                |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                        |  |                    |  |               
|----------------------- |  | ------------------ |  | --------------
|                        |  | December 31,2005   |  | January 1,2005
|                        |  | (Euro in millions)
|Stockholders equity(3) |  |                    |  |               
|Ireland                 |  | 4,039              |  | 2,342         
|United States           |  | 477                |  | 942           
|United Kingdom          |  | 1,810              |  | 2,299         
|Poland                  |  | 320                |  | 322           
|Rest of the World       |  | 26                 |  | 70            
|                        |  |                    |  |               
|                        |  | 6,672              |  | 5,975         
|                        |  |                    |  |               



|(1) | With the exception of stockholders equity, the geographical distribution is based
primarily on the location of the office recording the transactions.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | In December 2004, the preference dividend was included in dividends on non-equity shares. In
December 2005, the preference dividend is included within interest payable. This was due to the reclassification of the preference shares because of IAS 32 (see note 1).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The fungible nature of liabilities within the banking industry inevitably leads to allocations of liabilities to segments, some of which are necessarily subjective.
Accordingly, the directors believe that the analysis of total assets is more meaningful than the analysis of net assets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Turnover is not shown as it resulted in the main from the business of banking.



|4. | OPERATIONS BY BUSINESS SEGMENT(1)
|-- | ---------------------------------



|                         |                    |                          |   |      |       |  
|------------------------ | ------------------ | ------------------------ | - | ---- | ----- | -
|                         |                    | Years ended December 31, |  
|                         | 2005               |                          |   | 2004 |      
|                         | (Euro in millions) |                         
|Net interest income      |                    |                          |   |      |       |  
|AIB Bank ROI             |                    | 1,314                    |   |      | 1,144 |  
|AIB Bank GB & NI         |                    | 516                      |   |      | 416   |  
|Capital Markets          |                    | 435                      |   |      | 360   |  
|Poland                   |                    | 205                      |   |      | 174   |  
|Group                    |                    | 60                       |   |      | (22   | )
|                         |                    |                          |   |      |       |  
|                         |                    | 2,530                    |   |      | 2,072 |  
|                         |                    |                          |   |      |       |  
|Other income             |                    |                          |   |      |       |  
|AIB Bank ROI             |                    | 376                      |   |      | 364   |  
|AIB Bank GB & NI         |                    | 148                      |   |      | 189   |  
|Capital Markets          |                    | 407                      |   |      | 390   |  
|Poland                   |                    | 222                      |   |      | 188   |  
|Group                    |                    | (36                      | ) |      | 37    |  
|                         |                    |                          |   |      |       |  
|                         |                    | 1,117                    |   |      | 1,168 |  
|                         |                    |                          |   |      |       |  
|Total operating income   |                    |                          |   |      |       |  
|AIB Bank ROI             |                    | 1,690                    |   |      | 1,508 |  
|AIB Bank GB & NI         |                    | 664                      |   |      | 605   |  
|Capital Markets          |                    | 842                      |   |      | 750   |  
|Poland                   |                    | 427                      |   |      | 362   |  
|Group                    |                    | 24                       |   |      | 15    |  
|                         |                    |                          |   |      |       |  
|                         |                    | 3,647                    |   |      | 3,240 |  
|                         |                    |                          |   |      |       |  
|Total operating expenses |                    |                          |   |      |       |  
|AIB Bank ROI             |                    | 867                      |   |      | 813   |  
|AIB Bank GB & NI         |                    | 323                      |   |      | 305   |  
|Capital Markets          |                    | 400                      |   |      | 403   |  
|Poland                   |                    | 280                      |   |      | 245   |  
|Group                    |                    | 141                      |   |      | 103   |  
|                         |                    |                          |   |      |       |  
|                         |                    | 2,011                    |   |      | 1,869 |  
|                         |                    |                          |   |      |       |  



111



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                                               |                    |                          |      |               
|---------------------------------------------- | ------------------ | ------------------------ | ---- | --------------
|                                               |                    | Years ended December 31,
|                                               | 2005               |                          | 2004
|                                               | (Euro in millions)
|Provisions                                     |                    |                          |      |               
|AIB Bank ROI                                   |                    | 55                       |      | 44            
|AIB Bank GB & NI                               |                    | 21                       |      | 13            
|Capital Markets                                |                    | 46                       |      | 29            
|Poland                                         |                    | 15                       |      | 29            
|Group                                          |                    | 6                        |      | 18            
|                                               |                    |                          |      |               
|                                               |                    | 143                      |      | 133           
|                                               |                    |                          |      |               
|Income before taxes - continuing operations(2) |                    |                          |      |               
|AIB Bank ROI                                   |                    | 779                      |      | 657           
|AIB Bank GB & NI                               |                    | 322                      |      | 288           
|Capital Markets                                |                    | 403                      |      | 326           
|Poland                                         |                    | 132                      |      | 103           
|Group                                          |                    | 70                       |      | 22            
|                                               |                    |                          |      |               
|                                               |                    | 1,706                    |      | 1,396         
|                                               |                    |                          |      |               
|                                               |                    |                         
|                                               |                    | December 31,2005         |      | January 1,2005
|                                               |                    | (Euro in millions)      
|Total loans                                    |                    |                          |      |               
|AIB Bank ROI                                   |                    | 45,523                   |      | 35,794        
|AIB Bank GB & NI                               |                    | 18,346                   |      | 13,740        
|Capital Markets                                |                    | 23,794                   |      | 14,668        
|Poland                                         |                    | 4,487                    |      | 3,748         
|Group                                          |                    | 211                      |      | 280           
|                                               |                    |                          |      |               
|                                               |                    | 92,361                   |      | 68,230        
|                                               |                    |                          |      |               
|Total deposits                                 |                    |                          |      |               
|AIB Bank ROI                                   |                    | 34,172                   |      | 27,178        
|AIB Bank GB & NI                               |                    | 10,958                   |      | 9,084         
|Capital Markets                                |                    | 58,038                   |      | 40,537        
|Poland                                         |                    | 6,229                    |      | 5,452         
|Group                                          |                    | 123                      |      | 133           
|                                               |                    |                          |      |               
|                                               |                    | 109,520                  |      | 82,384        
|                                               |                    |                          |      |               
|Total assets                                   |                    |                          |      |               
|AIB Bank ROI                                   |                    | 55,224                   |      | 42,137        
|AIB Bank GB & NI                               |                    | 20,031                   |      | 15,175        
|Capital Markets                                |                    | 44,371                   |      | 33,550        
|Poland                                         |                    | 7,813                    |      | 6,703         
|Group                                          |                    | 5,775                    |      | 5,254         
|                                               |                    |                          |      |               
|                                               |                    | 133,214                  |      | 102,819       
|                                               |                    |                          |      |               
|Total risk weighted assets                     |                    |                          |      |               
|AIB Bank ROI                                   |                    | 39,073                   |      | 31,183        
|AIB Bank GB & NI                               |                    | 18,335                   |      | 13,510        
|Capital Markets                                |                    | 38,974                   |      | 30,098        
|Poland                                         |                    | 4,640                    |      | 4,232         
|Group                                          |                    | 634                      |      | 568           
|                                               |                    |                          |      |               
|                                               |                    | 101,656                  |      | 79,591        
|                                               |                    |                          |      |               



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                        |  |                    |  |               
|----------------------- |  | ------------------ |  | --------------
|                        |  | December 31, 2005  |  | January 1,2005
|                        |  | (Euro in millions)
|Stockholders equity(3) |  |                    |  |               
|AIB Bank ROI            |  | 2,564              |  | 2,341         
|AIB Bank GB & NI        |  | 1,203              |  | 1,014         
|Capital Markets         |  | 2,558              |  | 2,259         
|Poland                  |  | 305                |  | 318           
|Group                   |  | 42                 |  | 43            
|                        |  |                    |  |               
|                        |  | 6,672              |  | 5,975         
|                        |  |                    |  |               

---

|(1) | The business segment information is based on management accounts information. Income on
capital is allocated to the divisions on the basis of the capital required to support the level of risk weighted assets. Interest income earned on capital not allocated to divisions is reported in Group.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | In December 2004 the preference dividend was included in dividends on non-equity shares. In
December 2005 the preference dividend is included within interest payable. This was due to the reclassification of the preference shares because of IAS 32 (see note 1).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The fungible nature of liabilities within the banking industry inevitably leads to
allocations of liabilities to segments, some of which are necessarily subjective. Accordingly, the directors believe that the analysis of total assets is more meaningful than the analysis of net assets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. | INTEREST INCOME AND SIMILAR INCOME
|-- | ----------------------------------



|                                               |  |                          |  |      
|---------------------------------------------- |  | ------------------------ |  | -----
|                                               |  | Years ended December 31,
|                                               |  | 2005                     |  | 2004 
|                                               |  | (Euro in millions)      
|Interest on loans and receivables to banks     |  | 167                      |  | 98   
|Interest on loans and receivables to customers |  | 4,032                    |  | 3,044
|Interest on trading portfolio financial assets |  | 305                      |  | 232  
|Interest on financial investments              |  | 647                      |  | 644  
|                                               |  |                          |  |      
|                                               |  | 5,151                    |  | 4,018
|                                               |  |                          |  |      

Included within interest and similar income is income from listed investments of 931 million (2004:
810 million) and from unlisted investments of 86 million (2004: 83 million).



|6. | INTEREST EXPENSE
|-- | ----------------



|                                                                   |  |                          |  |      
|------------------------------------------------------------------ |  | ------------------------ |  | -----
|                                                                   |  | Years ended December 31,
|                                                                   |  | 2005                     |  | 2004 
|                                                                   |  | (Euro in millions)      
|Interest on amounts due to banks and customers                     |  | 1,944                    |  | 1,582
|Interest on debt securities in issue                               |  | 545                      |  | 255  
|Interest on subordinated liabilities and other capital instruments |  | 132                      |  | 109  
|                                                                   |  |                          |  |      
|                                                                   |  | 2,621                    |  | 1,946
|                                                                   |  |                          |  |      



|7. | DIVIDEND INCOME
|-- | ---------------

The dividend income relates to
income from equity shares.



|8. | TRADING INCOME
|-- | --------------



|                                                            |  |                          |   |  |      |  
|----------------------------------------------------------- |  | ------------------------ | - |  | ---- | -
|                                                            |  | Years ended December 31, |  
|                                                            |  | 2005                     |   |  | 2004 |  
|                                                            |  | (Euro in millions)       |  
|Foreign currency contracts                                  |  | 59                       |   |  | 66   |  
|Profits less losses from trading portfolio financial assets |  | 84                       |   |  | 55   |  
|Interest rate contracts                                     |  | (32                      | ) |  | (30  | )
|Equity index contracts                                      |  | 1                        |   |  | 5    |  
|                                                            |  |                          |   |  |      |  
|                                                            |  | 112                      |   |  | 96   |  
|                                                            |  |                          |   |  |      |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|9. | OTHER OPERATING INCOME
|-- | ----------------------



|                                                             |  |                          |  |     
|------------------------------------------------------------ |  | ------------------------ |  | ----
|                                                             |  | Years ended December 31,
|                                                             |  | 2005                     |  | 2004
|                                                             |  | (Euro in millions)      
|Profit on disposal of available for sale debt securities     |  | 17                       |  | 15  
|Profit on disposal of available for sale equity shares       |  | 2                        |  | 2   
|Profit on termination of off-balance sheet instruments       |  |                         |  | 36  
|Profit on disposal of investments in associated undertakings |  |                         |  | 1   
|Miscellaneous operating income                               |  | 53                       |  | 55  
|                                                             |  |                          |  |     
|Total operating income                                       |  | 72                       |  | 109 
|                                                             |  |                          |  |     



|10. | OPERATING EXPENSES
|--- | ------------------



|(a) | Administrative expenses
|--- | -----------------------



|                                                       |  |                          |  |      
|------------------------------------------------------ |  | ------------------------ |  | -----
|                                                       |  | Years ended December 31,
|                                                       |  | 2005                     |  | 2004 
|                                                       |  | (Euro in millions)      
|Personnel expenses:                                    |  |                          |  |      
|Wages and salaries                                     |  | 948                      |  | 868  
|Share-based payment plans (note 13)                    |  | 34                       |  | 25   
|Retirement benefits (note 14)                          |  | 133                      |  | 97   
|Social security costs                                  |  | 104                      |  | 92   
|Other personnel expenses                               |  | 79                       |  | 54   
|                                                       |  |                          |  |      
|                                                       |  | 1,298                    |  | 1,136
|                                                       |  |                          |  |      
|General and administrative expenses:                   |  |                          |  |      
|Auditors remuneration (including Value Added Tax):(1) |  |                          |  |      
|Audit services: Statutory audit                        |  | 2                        |  | 2    
|Audit related services                                 |  | 2                        |  |     
|                                                       |  |                          |  |      
|                                                       |  | 4                        |  | 2    
|                                                       |  |                          |  |      
|Other services: Taxation services                      |  | 1                        |  | 1    
|Other consultancy                                      |  | 1                        |  |     
|                                                       |  |                          |  |      
|                                                       |  | 2                        |  | 1    
|                                                       |  |                          |  |      
|Operating lease rentals:                               |  |                          |  |      
|Property                                               |  | 37                       |  | 37   
|                                                       |  |                          |  |      
|                                                       |  | 37                       |  | 37   
|                                                       |  |                          |  |      
|Other administrative expenses                          |  | 540                      |  | 539  
|                                                       |  |                          |  |      
|Restructuring costs                                    |  |                         |  | 9    
|                                                       |  |                          |  |      
|Administrative expenses                                |  | 1,881                    |  | 1,724
|                                                       |  |                          |  |      

---

|(1) | Audit services include fees for the statutory audits of the Group and fees for assignments
which are of an audit nature. These fees include assignments where the auditors provide assurance to third parties.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the
year ended December 31, 2005, 43% (2004: 53%) of the total statutory audit fees and 31% (2004: 41%) of audit related services were paid to overseas offices of the Auditors.

The Group policy on the provision of non-audit services to the bank and its subsidiary companies includes the prohibition on the provision of certain
services and the pre-approval by the Audit Committee of the engagement of the Auditors for non-audit work.

The Audit Committee has
reviewed the level of non-audit services fees and is satisfied that it has not affected the independence of the Auditors. It is Group policy to subject all large consultancy assignments to competitive tender.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|11. | AMOUNTS WRITTEN OFF/(WRITTEN BACK) FINANCIAL INVESTMENTS
|--- | --------------------------------------------------------



|                |  |                          |  |      |  
|--------------- |  | ------------------------ |  | ---- | -
|                |  | Years ended December 31, | 
|                |  | 2005                     |  | 2004 |  
|                |  | (Euro in millions)       | 
|Debt securities |  | 1                        |  | (4   | )
|Equity shares   |  | 7                        |  | 3    |  
|                |  |                          |  |      |  
|                |  | 8                        |  | (1   | )
|                |  |                          |  |      |  

Debt and equity securities were reclassified at January 1, 2005, as either trading portfolio assets,
financial investments available for sale or loans and receivables under IAS 32 and IAS 39. The amounts written off in 2005 relate to financial instruments available for sale. The 2004 amounts relate to the balance sheet captions debt securities and
equity shares.



|12. | CONSTRUCTION CONTRACT INCOME
|--- | ----------------------------

In 2005, Blogram
Limited a property development company and subsidiary of Allied Irish Banks, p.l.c., contracted with the Serpentine Consortium to construct on a fixed price contract basis, a new development at Bankcentre, Ballsbridge, Dublin on their behalf. At
December 31, 2005, contract revenue of 81 million less contract expenses of 36 million have been reported construction contract income. At December 31, 2005, 26 million was due from the consortium in respect of
construction contracts in progress.

A subsidiary of AIB has contracted with the Serpentine Consortium to lease the property on completion
at an initial rent of 16.1 million per annum for a period of 33 years with a break clause at year 23.



|13. | SHARE-BASED PAYMENT PLANS
|--- | -------------------------

The Group operates a
number of share-based compensation plans as outlined below on terms approved by the stockholders. The requirements of IFRS 2 Share-based payment have been applied to all equity share based payments granted after November 7, 2002
that had not vested by January 1, 2005.

Limitations on profit sharing and share options plans

Under the terms of the employees profit sharing plans, the aggregate number of shares that may be purchased/held by the Trustees in any ten-year
period may not exceed 10% of the issued ordinary share capital. The aggregate number of shares issued under the share option plans in any ten-year period may not exceed 5% of the issued ordinary share capital for the time being, provided, however,
that in any year the maximum number of shares made available shall not exceed 0.5% of such share capital. The company complies with guidelines issued by the Irish Association of Investment Managers in relation to these plans.

AIB share option plan

With the introduction of the
AIB Group Performance Share Plan 2005, the share option plan has been discontinued to the extent that further grants of options over the Companys shares may not be made, except in exceptional circumstances. Options were granted at the market
price, being the middle market quotation of the Banks shares on the Irish Stock Exchange on the day preceding the date on which the option is granted. The exercise of options granted between January 1, 1996 and December 31, 2000 is
conditional on the achievement of earnings per share (EPS) growth of at least 2% per annum, compound, above the increase in the Consumer Price Index (CPI) over a period of not less than three and not more than five years
from date of grant. The exercise of options granted since January 1, 2001 is conditional on the achievement of EPS growth of at least 5% per annum, compound, above the increase in the CPI over a period of not less than three and not more
than five years from date of grant. Options may not be transferred or assigned and may be settled through the issue/re-issue of shares. They may be exercised only between the third and seventh anniversaries of their grant in the case of the options
granted up to December 31, 2000 and between the third and tenth anniversaries of their grant in the case of options granted subsequent to that date.

The following table summarizes the share option plan activity over each of the three years ended December 31, 2005, 2004 and 2003.



|                           |  |                      |   |      |                                |      |                      |   |  |                                |  |                      |   |  |                               
|-------------------------- |  | -------------------- | - | ---- | ------------------------------ | ---- | -------------------- | - |  | ------------------------------ |  | -------------------- | - |  | ------------------------------
|                           |  | 2005                 |   | 2004 |                                | 2003
|                           |  | Numberof options000 |   |      | Weightedaverageexerciseprice  |      | Numberof options000 |   |  | Weightedaverageexerciseprice  |  | Numberof options000 |   |  | Weightedaverageexerciseprice 
|Outstanding at January 1,  |  | 21,025.2             |   |      | 11.90                          |      | 28,553.1             |   |  | 12.34                          |  | 29,518.2             |   |  | 11.73                         
|Granted                    |  | 1,459.0              |   |      | 16.21                          |      | 3,223.5              |   |  | 12.60                          |  | 3,272.9              |   |  | 13.30                         
|Exercised                  |  | (3,487.9             | ) |      | 10.55                          |      | (4,338.4             | ) |  | 10.14                          |  | (4,038.5             | ) |  | 8.63                          
|Forfeited                  |  | (368.5               | ) |      | 12.74                          |      | (111.5               | ) |  | 15.90                          |  | (199.5               | ) |  | 12.24                         
|Expired                    |  |                     |   |      |                               |      | (6,301.5             | ) |  |                               |  |                     |   |  |                              
|                           |  |                      |   |      |                                |      |                      |   |  |                                |  |                      |   |  |                               
|Outstanding at December 31 |  | 18,627.8             |   |      | 12.47                          |      | 21,025.2             |   |  | 11.90                          |  | 28,553.1             |   |  | 12.34                         
|Exercisable at December 31 |  | 10,924.4             |   |      | 11.71                          |      | 11,558.8             |   |  | 10.88                          |  | 9,360.0              |   |  | 13.93                         



115



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following tables present the number of options outstanding at December 31,
2005 and December 31, 2004.



|                        |  |                                                     |  |                                   |  |                                 
|----------------------- |  | --------------------------------------------------- |  | --------------------------------- |  | --------------------------------
|                        |  | December 31, 2005                                  
|Range of exercise price |  | Weighted average remainingcontractual life
in years |  | Number of optionsoutstanding 000 |  | Weighted average exerciseprice 
|10.02 - 11.98         |  | 3.34                                                |  | 7,910.3                           |  | 11.00                           
|12.60 - 13.90         |  | 7.39                                                |  | 9,280.5                           |  | 13.15                           
|16.20 - 18.63         |  | 9.32                                                |  | 1,437.0                           |  | 16.21                           
|                        | 
|                        |  | December 31, 2004                                  
|Range of exercise price |  | Weighted average remainingcontractual life in years |  | Number of optionsoutstanding 000 |  | Weightedaverage exerciseprice  
|10.02 - 11.98         |  | 4.90                                                |  | 14,634.8                          |  | 11.24                           
|12.20 - 13.90         |  | 7.90                                                |  | 6,390.4                           |  | 13.41                           

The binomial option pricing model has been used in estimating the value of the options granted.
The expected volatility is based on an analysis of historical volatility over the ten years prior to the grant of the awards. The following table details the assumptions used, and the resulting fair values provided by the option pricing model.



|                                                 |  |      |         |   |      |   |         |  
|------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                                                 |  | 2005 |         |   | 2004 |  
|Number of options (000)                         |  |      | 1,459.0 |   |      |   | 3,223.5 |  
|Exercize price                                   |  |     | 16.21   |   |      |  | 12.60   |  
|Vesting period (in years)                        |  |      | 3       |   |      |   | 3       |  
|Expected volatility                              |  |      | 28.1    | % |      |   | 30.5    | %
|Options life (years)                             |  |      | 10      |   |      |   | 10      |  
|Risk free rate                                   |  |      | 3.37    | % |      |   | 4.25    | %
|Expected dividends expressed as a dividend yield |  |      | 3.8     | % |      |   | 3.8     | %
|Fair value per option                            |  |     | 4.19    |   |      |  | 3.24    |  

Employee profit sharing plans

The Company operates the AIB Approved Employees Profit Sharing Scheme 1998 on terms approved by the stockholders. There are no vesting conditions. All employees, including executive directors of the
Company and certain subsidiaries are eligible to participate, subject to minimum service periods (i.e. a continuous employment for at least one year prior to the last day of the relevant accounting period). The directors at their discretion may set
aside each year a sum not exceeding 5% of eligible profits of participating companies.

Eligible employees in the Republic of Ireland may
elect to receive their profit sharing allocations either in shares or in cash. Such shares are held by Trustees for a minimum period of two years and are required to be held for a total period of three years for the employees to obtain the maximum
tax benefit. Such employees may also elect to forego an amount of salary, subject to certain limitations, towards the acquisition of additional shares. The maximum market value of shares that may be appropriated to any employee in a year may not
exceed 12,700.

In December 2002 a Share Ownership Planwas launched in the UK to replace the profit sharing plan that
previously operated for UK-based employees. The Plan, which was approved by shareholders at the 2002 Annual General Meeting, provides for the receipt by eligible employees of shares in a number of categories: Partnership Shares, in which employees
may invest up to Stg £ 1,500 per annum from salary; Free Shares, involving the award by the Company of shares up to the value of Stg £ 3,000 per annum per employee, and Dividend Shares, which may be acquired by employees by
re-investing dividends of up to Stg £ 1,500 per annum.

To participate in the plan eligible employees must have been in the
continuous employment of the Group from the July 1, prior to the grant date. During 2005, a total of 274,251 shares with a value of 4.3 million (2004: 342,674 shares with a value of 3.6 million) were awarded under the Free Share
plan. Shares are forfeited on a sliding scale should the employee leave the service of the Group within three years of grant date. The market value is determined as the mid market price of the Companys shares on the Irish Stock Exchange daily
official list on the relevant date.



116



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following table summarizes the share ownership plan activity during 2005, 2004 and 2003.



|                           |  |                       |   |      |                                 |      |                       |   |  |                                 |  |                       |   |  |                                
|-------------------------- |  | --------------------- | - | ---- | ------------------------------- | ---- | --------------------- | - |  | ------------------------------- |  | --------------------- | - |  | -------------------------------
|                           |  | 2005                  |   | 2004 |                                 | 2003
|                           |  | Number of options000 |   |      | Weightedaverage exerciseprice  |      | Number of options000 |   |  | Weightedaverage exerciseprice  |  | Number of options000 |   |  | Weightedaverage exerciseprice 
|Outstanding at January. 1, |  | 661.5                 |   |      | 11.97                           |      | 321.0                 |   |  | 11.98                           |  |                      |   |  |                               
|Granted                    |  | 274.2                 |   |      | 15.78                           |      | 342.7                 |   |  | 11.96                           |  | 324.4                 |   |  | 11.98                          
|Forfeited                  |  | (19.1                 | ) |      | 15.78                           |      | (2.2                  | ) |  | 11.96                           |  | (3.4                  | ) |  | 11.98                          
|                           |  |                       |   |      |                                 |      |                       |   |  |                                 |  |                       |   |  |                                
|Outstanding at December 31 |  | 916.6                 |   |      | 13.03                           |      | 661.5                 |   |  | 11.97                           |  | 321.0                 |   |  | 11.98                          
|                           |  |                       |   |      |                                 |      |                       |   |  |                                 |  |                       |   |  |                                

AIB Save As You Earn (SAYE) Share Option Scheme UK

The company operates a Save As You Earn Share Option Scheme in the UK. The plan is open to all employees of AIB Group in the UK who have completed six
months continuous service at the date of grant. Under the Scheme employees may opt to save fixed amounts on a regular basis, over a three-year period, subject to a maximum monthly saving of Stg £ 250 per employee. At the end of the
three-year period, a tax-free bonus equal to 1.7 times the participants monthly contribution is added. In addition, at the end of the three-year period the participant has 6 months in which to exercise the option and purchase the shares at the
option price (fixed price being the average price per AIB share, on the London Stock Exchange on the day prior to grant date, less 20% discount); or the participant may withdraw the savings and bonus amount.

The following table summarizes option activity during 2005 and 2004.



|                           |  |                       |   |      |                                 |  |                       |   |  |                                
|-------------------------- |  | --------------------- | - | ---- | ------------------------------- |  | --------------------- | - |  | -------------------------------
|                           |  | 2005                  |   | 2004
|                           |  | Number of options000 |   |      | Weightedaverage exerciseprice  |  | Number of options000 |   |  | Weightedaverage exerciseprice 
|Outstanding at January 1   |  | 1,186.5               |   |      | 9.57                            |  |                      |   |  |                               
|Granted                    |  | 299.2                 |   |      | 13.02                           |  | 1,221.0               |   |  | 9.57                           
|Forfeited                  |  | (51.0                 | ) |      | 13.02                           |  | (34.5                 | ) |  | 9.57                           
|                           |  |                       |   |      |                                 |  |                       |   |  |                                
|Outstanding at December 31 |  | 1,434.7               |   |      | 10.17                           |  | 1,186.5               |   |  | 9.57                           
|Exercizable at December 31 |  |                      |   |      |                                |  |                      |   |  |                               
|                           |  |                       |   |      |                                 |  |                       |   |  |                                

The binominal option pricing model has been used in estimating the value of the options granted.
The expected volatility is based on historical volatility over the three and a half years prior to the grant of the SAYE options.

The
following table details the assumptions used, and the resulting fair values provided by the option pricing model.



|                                                 |  |      |       |   |      |   |       |  
|------------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | -
|                                                 |  | 2005 |       |   | 2004 |  
|Share price at grant date                        |  |     | 16.28 |   |      |  | 11.96 |  
|Exercize price                                   |  |     | 13.02 |   |      |  | 9.57  |  
|Vesting period (years)                           |  |      | 3     |   |      |   | 3     |  
|Expected volatility                              |  |      | 27.3  | % |      |   | 30.5  | %
|Options life (years)                             |  |      | 3.5   |   |      |   | 3.5   |  
|Expected life (years)                            |  |      | 3     |   |      |   | 3     |  
|Risk-free rate                                   |  |      | 2.48  | % |      |   | 3.40  | %
|Expected dividends expressed as a dividend yield |  |      | 3.8   | % |      |   | 3.8   | %
|Possibility of ceasing employment before vesting |  |      | 17.67 | % |      |   | 17.67 | %
|Fair value per option                            |  |     | 3.99  |   |      |  | 3.26  |  



117



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Long Term Incentive Plans

Under the terms of the AIB Group Long Term Incentive Plan, approved by stockholders at the 2000 Annual General Meeting, conditional grants of awards of ordinary shares had been made as at December 31, 2005
in respect of 1,305,200 ordinary shares in aggregate to 234 employees. These awards will vest in full in the award-holders only if (a) the growth in the Companys EPS, as defined in the Rules of the Plan, in any three consecutive years
within the five years following the grant is not less than the growth in the CPI plus 5% per annum, compound, over the same three year period; and(b) the growth in the Companys core EPS, as defined in the Rules of the Plan,
over the three year period during which the criterion at (a) is satisfied, is such as to position the Company in the top 20% of the FTSE Eurotop Banks Retail Index. Partial vesting, on a reducing scale, will occur if the growth in the
Companys core EPS positions the Company outside the top 20% of that Index but still within its top 45%, subject to the criterion at (a) being satisfied. Vested shares must be held until normal retirement date, except that award-holders
may dispose of shares sufficient to meet the income tax liability arising on vesting. No awards were granted under this plan and no vesting took place of existing awards during 2005 or 2004.

During 2005, the AIB Group Performance Share Plan 2005was introduced on terms approved by the stockholders. This Plan is designed to provide
market-competitive incentives for senior executives, in the context of the Companys long-term performance against stretching growth targets and the overall return to shareholders. Conditional awards of shares are made to employees with vesting
to take place on the third anniversary of the grant subject to certain performance conditions.

10% of the shares will vest if EPS
performance over a three year period achieves the growth in Consumer Price Index (CPI) plus 5% per annum with up to 50% vesting on a graduated scale if EPS performance over a three year period achieves CPI plus 10%. A further 10% of
the shares will vest if the Total Shareholder Return (TSR) of the Group is in the top half of a peer group of 15 banks, with up to 50% vesting on a graduated scale if the TSR of the Group over the same three year period places the Group
in the top three of the peer group. Settlement will take place through the issue/reissue of shares.

During 2005, conditional awards of
290,905 shares in aggregate were granted to nine employees and were outstanding at the end of the period. In respect of the part of the award subject to the EPS vesting criteria, the market value of the shares at the date of grant is used to
determine the value of the grant, adjusted to take into account the expected vesting. In respect of the part of the award subject to the Total Shareholder Return vesting criteria, the expense is determined using the expected vesting of the shares.

Income statement expense

The Group
attributes a value to the service provided by the employee based on the value of the share option granted. The total expense arising from share based payment transactions amounted to 34 million in the year ended December 31, 2005 (2004:
25 million)



|14. | RETIREMENT BENEFITS
|--- | -------------------

The Group operates a number of
pension and retirement benefits plans for employees, the majority of which are funded. These include defined benefit and defined contribution plans.

Defined benefit plans

The Group operates a number of defined benefit plans, the most significant being the AIB Group Irish
Pension Scheme (the Irish plan) and the AIB Group UK Pension Scheme (the UK plan). Approximately fifty per cent of staff in the Republic of Ireland are members of the the Irish plan while 47% of staff in the UK are members of the the UK plan.
Retirement benefits for the defined benefit scheme are calculated by reference to service and pensionable salary at normal retirement date.

Independent actuarial valuations, for the main Irish and UK plan, are carried out on a triennial basis. The last such valuations were carried out on June 30, 2003 using the Projected Unit Method. The plans are funded and contribution
rates of 26.0% and 44.6% have been set for the Irish and UK plan respectively with effect from January 1, 2004. The total contribution to the defined benefit plans in 2006 is estimated to be 118 million approximately. As both these plans
are closed to new entrants, under the Projected Unit Method the current service cost and the standard contribution rates will increase as members of the plans approach retirement. The actuarial valuations are available for inspection only to the
members of the plans.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following table summarizes the financial assumptions adopted in the preparation of these accounts
in respect of the main plans. The assumptions, including the expected long-term rate of return on assets, have been set upon advice of the Groups actuary.



|                                        |  |              |  |          
|--------------------------------------- |  | ------------ |  | ---------
|                                        |  | December 31,
|                                        |  | 2005         |  | 2004     
|                                        |  | %            |  | %        
|Financial assumptions                   |  |              |  |          
|Irish plan                              |  |              |  |          
|Rate of increase in salaries            |  | 4.0          |  | 4.0      
|Rate of increase of pensions in payment |  | 2.25         |  | 2.5      
|Discount rate                           |  | 4.3          |  | 4.9      
|Inflation assumptions                   |  | 2.25         |  | 2.5      
|                                        |  |              |  |          
|UK plan                                 |  |              |  |          
|Rate of increase in salaries            |  | 4.0          |  | 4.0      
|Rate of increase of pensions in payment |  | 2.75         |  | 2.75     
|Discount rate                           |  | 4.75         |  | 5.30     
|Inflation assumptions                   |  | 2.5          |  | 2.5      
|                                        |  |              |  |          
|Other plans                             |  |              |  |          
|Rate of increase in salaries            |  | 4.0-4.0      |  | 4.0-4.25 
|Rate of increase of pensions in payment |  | 0.0-2.75     |  | 0.0-2.75 
|Discount rate                           |  | 4.3-5.75     |  | 4.90-5.75
|Inflation assumptions                   |  | 2.25-2.75    |  | 2.5-2.75 
|                                        |  |              |  |          

The mortality assumptions used in estimating the actuarial value of the liabilities are based on
the PM/FA92 (c=2020) table. This reflects the use today of the expected lifetimes of pensioners in the year 2020. The use of this table represents the present best estimate of future mortality, having taken actuarial advice.

With respect to the selection of discount rate, the relevant iBoxx index of euro and sterling denominated AA-rated corporate bonds is used with reference to the average
duration of the pension liabilities.

The following table sets out on a combined basis for all plans, the fair value of the assets held by
the plans together with the long term rate of return expected for each class of assets.



|                                               |  |                                 |  |        |                   |  |                                 |  |        |  
|---------------------------------------------- |  | ------------------------------- |  | ------ | ----------------- |  | ------------------------------- |  | ------ | -
|                                               |  | December 31, 2005               |  |        | December 31, 2004 | 
|                                               |  | Long termrate of returnexpected |  | Value  |                   |  | Long termrate of returnexpected |  | Value  |  
|                                               |  | %                               |  |  m    |                   |  | %                               |  |  m    |  
|Equities                                       |  | 7.3                             |  | 2,267  |                   |  | 7.8                             |  | 1,780  |  
|Bonds                                          |  | 3.6                             |  | 463    |                   |  | 4.1                             |  | 344    |  
|Property                                       |  | 6.3                             |  | 287    |                   |  | 6.4                             |  | 274    |  
|Cash                                           |  | 2.6                             |  | 118    |                   |  | 3.0                             |  | 130    |  
|                                               |  |                                 |  |        |                   |  |                                 |  |        |  
|Total market value of assets                   |  | 6.5                             |  | 3,135  |                   |  | 6.9                             |  | 2,528  |  
|Actuarial value of liabilities of funded plans |  |                                 |  | (4,272 | )                 |  |                                 |  | (3,356 | )
|                                               |  |                                 |  |        |                   |  |                                 |  |        |  
|Deficit in funded plans                        |  |                                 |  | (1,137 | )                 |  |                                 |  | (828   | )
|Unfunded schemes                               |  |                                 |  | (90    | )                 |  |                                 |  | (58    | )
|                                               |  |                                 |  |        |                   |  |                                 |  |        |  
|Net pension deficit                            |  |                                 |  | (1,227 | )                 |  |                                 |  | (886   | )
|                                               |  |                                 |  |        |                   |  |                                 |  |        |  

At December 31, 2005, the pension plan assets within equities included AIB shares amounting
to 64 million (December 31, 2004: 65 million).

Included in the actuarial value of the liabilities is an amount in respect of
commitments to pay annual pensions amounting to 108,341 in aggregate to a number of former directors.



119



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following table sets out the components of the defined benefit cost for each of the years ended
December 31, 2005 and 2004.



|                                              |  |                          |   |  |      |  
|--------------------------------------------- |  | ------------------------ | - |  | ---- | -
|                                              |  | Years ended December 31, |  
|                                              |  | 2005                     |   |  | 2004 |  
|                                              |  | (Euro in millions)       |  
|Included in administrative expenses:          |  |                          |   |  |      |  
|Current service cost                          |  | 103                      |   |  | 91   |  
|Past service cost                             |  | 14                       |   |  | 3    |  
|Settlements and curtailments                  |  | (1                       | ) |  |     |  
|Expected return on pension plan assets        |  | (179                     | ) |  | (171 | )
|Interest on pension plan liabilities          |  | 171                      |   |  | 153  |  
|                                              |  |                          |   |  |      |  
|Cost of providing defined retirement benefits |  | 108                      |   |  | 76   |  
|                                              |  |                          |   |  |      |  

The actual return on plan assets during the year ended December 31, 2005 was 553
million (2004: 270 million)



|                                                                                              |  |                          |   |  |       |  
|--------------------------------------------------------------------------------------------- |  | ------------------------ | - |  | ----- | -
|                                                                                              |  | Years ended December 31, |  
|                                                                                              |  | 2005                     |   |  | 2004  |  
|                                                                                              |  | (Euro in millions)       |  
|Movement in defined benefit obligation during the year                                        |  |                          |  
|Defined benefit obligation at beginning of year                                               |  | 3,414                    |   |  | 2,932 |  
|Current service cost                                                                          |  | 103                      |   |  | 91    |  
|Past service cost                                                                             |  | 14                       |   |  | 3     |  
|Interest cost                                                                                 |  | 171                      |   |  | 153   |  
|Actuarial gains and losses                                                                    |  | 718                      |   |  | 329   |  
|Benefits paid                                                                                 |  | (84                      | ) |  | (79   | )
|Curtailments and settlements                                                                  |  | (1                       | ) |  |      |  
|Translation adjustment on non-euro plans                                                      |  | 27                       |   |  | (15   | )
|                                                                                              |  |                          |   |  |       |  
|Defined benefit obligation at end of year                                                     |  | 4,362                    |   |  | 3,414 |  
|                                                                                              |  |                          |   |  |       |  
|                                                                                              | 
|                                                                                              |  | Years ended December 31, |  
|                                                                                              |  | 2005                     |   |  | 2004  |  
|                                                                                              |  | (Euro in millions)       |  
|Movement in the fair value of plan assets during the year                                     |  |                          |   |  |       |  
|Fair value of plan assets at beginning of year                                                |  | 2,528                    |   |  | 2,249 |  
|Expected return                                                                               |  | 179                      |   |  | 171   |  
|Actuarial gains and losses                                                                    |  | 374                      |   |  | 99    |  
|Contributions by employer                                                                     |  | 121                      |   |  | 102   |  
|Benefits paid                                                                                 |  | (84                      | ) |  | (79   | )
|Translation adjustment on non-euro plans                                                      |  | 17                       |   |  | (14   | )
|                                                                                              |  |                          |   |  |       |  
|Fair value of plan assets at end of year                                                      |  | 3,135                    |   |  | 2,528 |  
|                                                                                              |  |                          |   |  |       |  
|                                                                                              | 
|                                                                                              |  | Years ended December 31, |  
|                                                                                              |  | 2005                     |   |  | 2004  |  
|                                                                                              |  | (Euro in millions)       |  
|Analysis of the amount recognized in the statement of recognised income and expense (SORIE) |  |                          |   |  |       |  
|Actual return less expected return on pension scheme assets                                   |  | 374                      |   |  | 99    |  
|Experience gains and losses on plan liabilities                                               |  | (62                      | ) |  | (150  | )
|Changes in demographic and financial assumptions                                              |  | (656                     | ) |  | (179  | )
|                                                                                              |  |                          |   |  |       |  
|Actuarial loss recognized under IAS 19                                                        |  | (344                     | ) |  | (230  | )
|Deferred tax                                                                                  |  | 59                       |   |  | 33    |  
|                                                                                              |  |                          |   |  |       |  
|Recognized in the statement of recognized income and expense                                  |  | (285                     | ) |  | (197  | )
|                                                                                              |  |                          |   |  |       |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                                                              |  |                          |   |  |       |   |  |       |   |  |        |   |  |       |  
|------------------------------------------------------------- |  | ------------------------ | - |  | ----- | - |  | ----- | - |  | ------ | - |  | ----- | -
|                                                              |  | Years ended December 31, |  
|                                                              |  | 2005                     |   |  | 2004  |   |  | 2003  |   |  | 2002   |   |  | 2001  |  
|                                                              |  | (Euro in millions)       |  
|History of experience gains and losses                        |  |                          |   |  |       |   |  |       |   |  |        |   |  |       |  
|Difference between expected and actual return on plan assets: |  |                          |   |  |       |   |  |       |   |  |        |   |  |       |  
|Amount                                                        |  | 374                      |   |  | 99    |   |  | 93    |   |  | (862   | ) |  | (438  | )
|Percentage of plan assets                                     |  | 12                       | % |  | 4     | % |  | 4     | % |  | 40     | % |  | 15    | %
|Experience gains and losses on plan liabilities:              |  |                          |   |  |       |   |  |       |   |  |        |   |  |       |  
|Amount                                                        |  | (62                      | ) |  | (150  | ) |  | 97    |   |  | (18    | ) |  | (32   | )
|Percentage of plan liabilities.                               |  | 1                        | % |  | 4     | % |  | 3     | % |  | 1      | % |  | 1     | %
|Total amount recognized in SORIE:                             |  |                          |   |  |       |   |  |       |   |  |        |   |  |       |  
|Amount                                                        |  | (344                     | ) |  | (230  | ) |  | (67   | ) |  | (1,003 | ) |  | (502  | )
|Percentage of plan liabilities                                |  | 8                        | % |  | 7     | % |  | 2     | % |  | 35     | % |  | 19    | %
|                                                              |  |                          |   |  |      
|                                                              |  | 2005                     |   |  | 2004  |   |  | 2003  |   |  | 2002   |   |  | 2001  |  
|                                                              |  | (Euro in millions)       |  
|Defined benefit pension plans                                 |  |                          |   |  |       |   |  |       |   |  |        |   |  |       |  
|Funded defined benefit obligation                             |  | 4,272                    |   |  | 3,356 |   |  | 2,855 |   |  | 2,879  |   |  | 2,645 |  
|Plan assets                                                   |  | 3,135                    |   |  | 2,528 |   |  | 2,225 |   |  | 2,169  |   |  | 2,903 |  
|                                                              |  |                          |   |  |       |   |  |       |   |  |        |   |  |       |  
|Deficit/(surplus) within funded plans                         |  | 1,137                    |   |  | 828   |   |  | 630   |   |  | 710    |   |  | (258  | )
|                                                              |  |                          |   |  |       |   |  |       |   |  |        |   |  |       |  

Defined contribution plans

The Group operates a number of defined contribution plans. The defined benefit plans in Ireland and the UK were closed to new members from December 1997. Employees joining after December 1997 join on a defined
contribution basis. The standard contribution rate in Ireland is 8%. The standard contribution rate in the UK is 5% and these members are also accruing benefits under SERPS (the State Earnings Related Pension Scheme). The total cost in respect of
defined contribution schemes for 2005 was 25 million (2004: 21 million).



|15. | GAIN ON DISPOSAL OF BUSINESSES
|--- | ------------------------------

2005

The gain on disposal of businesses in 2005 of 5 million relates to the sale of Community Counselling Services of 4 million (tax charge 1
million), and deferred consideration of 1 million (tax charge 0.3 million), arising from the sale of the Govett business in 2003.

2004

The gain on disposal of businesses in 2004 of 17 million relates to the sale of BZWBKs subsidiary, CardPoint S.A. of
13 million (tax charge 2 million), and deferred consideration of 4 million (tax charge 1 million), arising from the sale of the Govett business in 2003.



121



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|16. | APPLICABLE TAXES
|--- | ----------------



|                                                  |  |                          |   |  |  |  |      |  
|------------------------------------------------- |  | ------------------------ | - |  |  |  | ---- | -
|                                                  |  | Years ended December 31, |  
|                                                  |  | 2005                     |   |  |  |  | 2004 |  
|                                                  |  | (Euro in millions)       |  
|Allied Irish Banks, p.l.c. and subsidiaries:      |  |                          |   |  |  |  |      |  
|Corporation tax in Republic of Ireland            |  |                          |   |  |  |  |      |  
|Current tax on income for the period(1)           |  | 160                      |   |  |  |  | 136  |  
|Adjustments in respect of prior periods           |  | 1                        |   |  |  |  | (5   | )
|                                                  |  | 161                      |   |  |  |  | 131  |  
|Double taxation relief                            |  | (10                      | ) |  |  |  | (13  | )
|                                                  |  |                          |   |  |  |  |      |  
|                                                  |  | 151                      |   |  |  |  | 118  |  
|Foreign tax                                       |  |                          |   |  |  |  |      |  
|Current tax on income for the period              |  | 163                      |   |  |  |  | 181  |  
|Adjustments in respect of prior periods           |  | (11                      | ) |  |  |  | (11  | )
|                                                  |  | 152                      |   |  |  |  | 170  |  
|                                                  |  |                          |   |  |  |  |      |  
|Total current tax                                 |  | 303                      |   |  |  |  | 288  |  
|                                                  |  |                          |   |  |  |  |      |  
|Deferred taxation                                 |  |                          |   |  |  |  |      |  
|Origination and reversal of timing differences    |  | 16                       |   |  |  |  | (10  | )
|Other                                             |  |                         |   |  |  |  | (8   | )
|                                                  |  |                          |   |  |  |  |      |  
|Total deferred taxation                           |  | 16                       |   |  |  |  | (18  | )
|                                                  |  |                          |   |  |  |  |      |  
|Taxation expense - continuing operations          |  | 319                      |   |  |  |  | 270  |  
|                                                  |  |                          |   |  |  |  |      |  
|Effective income tax rate - continuing operations |  | 18.7                     | % |  |  |  | 19.4 | %
|                                                  |  |                          |   |  |  |  |      |  



|(1) | Includes a charge of 29.5 million (2004: 29.5 million) in relation to the Irish Government bank levy.
|--- | -------------------------------------------------------------------------------------------------------

Income before taxes - continuing operations in the Republic of Ireland amounted to 850 million (2004: 726 million) and in all other jurisdictions amounted to
856 million (2004: 670 million).

Total deferred taxation was (3) million (2004: (2) million) in the Republic of Ireland and
19 million (2004: (16) million) in foreign jurisdictions.

Factors affecting the effective income tax rate

The effective income tax rate for 2005 and 2004 is lower than the weighted average of the Groups statutory corporation tax rates across its
geographic locations. The differences are explained below.



|                                                         |  |      |   |  |      |  
|-------------------------------------------------------- |  | ---- | - |  | ---- | -
|                                                         |  | 2005 |   |  | 2004 |  
|                                                         |  | %    |   |  | %    |  
|Weighted average corporation tax rate(2)                 |  | 20.7 |   |  | 20.5 |  
|Effects of:                                              |  |      |   |  |      |  
|Expenses not deductible for tax purposes                 |  | 0.4  |   |  | 3.2  |  
|Exempted income, income at reduced rates and tax credits |  | (1.2 | ) |  | (1.8 | )
|Net effect of differing tax rates overseas               |  | 0.3  |   |  | 0.3  |  
|Capital allowances in excess of depreciation             |  | 0.2  |   |  | 0.2  |  
|Other differences                                        |  | (0.1 | ) |  | 0.3  |  
|Tax on associated undertakings                           |  | (3.0 | ) |  | (4.5 | )
|Bank levy in Republic of Ireland                         |  | 1.7  |   |  | 2.1  |  
|Adjustments to tax charge in respect of previous periods |  | (0.3 | ) |  | (0.9 | )
|                                                         |  |      |   |  |      |  
|Effective income tax rate - continuing operations        |  | 18.7 |   |  | 19.4 |  
|                                                         |  |      |   |  |      |  



|(2) | The weighted average corporation tax rate is derived from the standard tax rate in each jurisdiction multiplied by the net income generated in that jurisdiction.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



|17. | MINORITY INTERESTS IN SUBSIDIARIES
|--- | ----------------------------------



|                                                                      |  |                          |  |     
|--------------------------------------------------------------------- |  | ------------------------ |  | ----
|                                                                      |  | Years ended December 31,
|                                                                      |  | 2005                     |  | 2004
|                                                                      |  | (Euro in millions)      
|The profit attributable to minority interests is analyzed as follows: |  |                          |  |     
|Equity interest in subsidiaries                                       |  | 42                       |  | 27  
|Non-equity interest in subsidiaries (note 43)                         |  | 48                       |  | 2   
|                                                                      |  |                          |  |     
|                                                                      |  | 90                       |  | 29  
|                                                                      |  |                          |  |     



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|18. | DISTRIBUTIONS TO OTHER EQUITY HOLDERS
|--- | -------------------------------------

Distributions to other equity holders are recognized in equity when declared by the Board of Directors. In 2005, the distributions on the 500 million Reserve Capital Instruments (RCIs) which were reclassified to equity on
January 1, 2005 amounted to 38 million. The dividend of 4 million in 2004 relates to the US$ 250 million non-cumulative preference shares which were reclassified to liabilities on January 1, 2005.



|19. | DISTRIBUTIONS ON EQUITY SHARES
|--- | ------------------------------

Holders of ordinary
shares are entitled to receive such dividends out of the profits of the Group as are available by law for distribution and as may be declared by the stockholders at general meeting, but no dividends may be declared in excess of an amount recommended
by the Board of Directors. The Board may, without obtaining prior stockholder approval, pay to the stockholders such interim dividends as appear to the Board to be justified by the net income of the Group.

No dividend can be declared or interim dividend paid unless the dividend on any outstanding preference shares most recently payable shall have been paid
in cash.



|                              |  |                          |  |                          |  |      |  |     
|----------------------------- |  | ------------------------ |  | ------------------------ |  | ---- |  | ----
|                              |  | Years ended December 31, |  | Years ended December 31,
|                              |  | 2005                     |  | 2004                     |  | 2005 |  | 2004
|                              |  | (cent per 0.32 share)   |  | (Euro in millions)      
|Ordinary Shares of 0.32 each |  |                          |  |                          |  |      |  |     
|Interim dividend 2005 (2004)  |  | 23.0                     |  | 20.9                     |  | 200  |  | 179 
|Final dividend 2004 (2003)    |  | 38.5                     |  | 35.0                     |  | 332  |  | 296 
|                              |  |                          |  |                          |  |      |  |     
|                              |  | 61.5                     |  | 55.9                     |  | 532  |  | 475 
|                              |  |                          |  |                          |  |      |  |     



|20. | EARNINGS PER SHARE
|--- | ------------------



|                                                                   |  |                                |   |  |            |  
|------------------------------------------------------------------ |  | ------------------------------ | - |  | ---------- | -
|                                                                   |  | Years ended December 31,       |  
|                                                                   |  | 2005                           |   |  | 2004       |  
|                                                                   |  | (Euro in millions)             |  
|(a) Basic                                                          |  |                                |   |  |            |  
|Net income attributable to equity holders of the parent            |  | 1,343                          |   |  | 1,150      |  
|Distributions to other equity holders (note 18)                    |  | (38                            | ) |  | (4         | )
|                                                                   |  |                                |   |  |            |  
|Net income attributable to ordinary stockholders                   |  | 1,305                          |   |  | 1,146      |  
|                                                                   |  |                                |   |  |            |  
|Weighted average number of shares in issue during the period       |  | 864.5m                         |   |  | 852.0m     |  
|Earnings per share                                                 |  | Eur 151.0c                     |   |  | Eur 134.5c |  
|                                                                   |  |                                |   |  |            |  
|                                                                   |  |                               
|                                                                   |  | 2005                           |   |  | 2004       |  
|                                                                   |  | (Euro in millions)             |  
|(b) Diluted                                                        |  |                                |   |  |            |  
|Net income attributable to ordinary stockholders                   |  | 1,305                          |   |  | 1,146      |  
|Dilutive impact of potential ordinary shares in associated company |  | (1                             | ) |  |           |  
|                                                                   |  |                                |   |  |            |  
|Adjusted net income attributable to ordinary stockholders          |  | 1,304                          |   |  | 1,146      |  
|                                                                   |  |                                |   |  |            |  
|                                                                   | 
|                                                                   |  | (Number of shares in millions) |  
|Weighted average number of shares in issue during the period       |  | 864.5                          |   |  | 852.0      |  
|Dilutive effect of options outstanding                             |  | 5.7                            |   |  | 3.1        |  
|                                                                   |  |                                |   |  |            |  
|Potential weighted average number of shares                        |  | 870.2                          |   |  | 855.1      |  
|Earnings per share - diluted                                       |  | Eur 149.8c                     |   |  | Eur 134.0c |  
|                                                                   |  |                                |   |  |            |  



123



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|21. | ADJUSTED EARNINGS PER SHARE
|--- | ---------------------------



|                                               |  |                        |   |  |         |   |  |       |   |  |       |  
|---------------------------------------------- |  | ---------------------- | - |  | ------- | - |  | ----- | - |  | ----- | -
|                                               |  | Basic                  |   |  | Diluted |  
|                                               |  | 2005                   |   |  | 2004    |   |  | 2005  |   |  | 2004  |  
|                                               |  | (cent per 0.32 share) |  
|(a) Earnings per share                         |  |                        |   |  |         |   |  |       |   |  |       |  
|As reported                                    |  | 151.0                  |   |  | 134.5   |   |  | 149.8 |   |  | 134.0 |  
|Adjustments:                                   |  |                        |   |  |         |   |  |       |   |  |       |  
|Construction contract income                   |  | (4.4                   | ) |  |        |   |  | (4.4  | ) |  |      |  
|Hedge volatility                               |  | (0.7                   | ) |  |        |   |  | (0.7  | ) |  |      |  
|Effective interest rate                        |  |                       |   |  | (2.5    | ) |  |      |   |  | (2.5  | )
|Insurance business                             |  |                       |   |  | (2.4    | ) |  |      |   |  | (2.4  | )
|                                               |  |                        |   |  |         |   |  |       |   |  |       |  
|                                               |  | 145.9                  |   |  | 129.6   |   |  | 144.7 |   |  | 129.1 |  
|                                               |  |                        |   |  |         |   |  |       |   |  |       |  
|                                               |  |                       
|                                               |  | Basic                  |   |  | Diluted |  
|                                               |  | 2005                   |   |  | 2004    |   |  | 2005  |   |  | 2004  |  
|                                               |  | (cent per 0.32 share) |  
|(b) Earnings per share  continuing operations |  |                        |   |  |         |   |  |       |   |  |       |  
|As reported                                    |  | 145.7                  |   |  | 128.3   |   |  | 144.6 |   |  | 127.8 |  
|Adjustments:                                   |  |                        |   |  |         |   |  |       |   |  |       |  
|Construction contract income                   |  | (4.4                   | ) |  |        |   |  | (4.4  | ) |  |      |  
|Hedge volatility                               |  | (0.7                   | ) |  |        |   |  | (0.7  | ) |  |      |  
|Effective interest rate                        |  |                       |   |  | (2.5    | ) |  |      |   |  | (2.5  | )
|                                               |  |                        |   |  |         |   |  |       |   |  |       |  
|                                               |  | 140.6                  |   |  | 125.8   |   |  | 139.5 |   |  | 125.3 |  
|                                               |  |                        |   |  |         |   |  |       |   |  |       |  

Adjusted earnings per share is presented to help understand the underlying performance of the
Group. The adjustments in 2005 are items that do not reflect the underlying business performance. As IAS 39 and IFRS 4 have been implemented with effect from January 1, 2005, the adjustments in 2004 reflect the impact that these standards would
have had on the effective interest rate and insurance business had they been applied from January 1, 2004.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|22. | TREASURY BILLS AND OTHER ELIGIBLE BILLS
|--- | ---------------------------------------

Treasury
bills amounting to 201 million were held as available for sale. Their maturity profile is set out in note 57. There was no fair value gain or loss at December 31, 2005.



|23. | TRADING PORTFOLIO FINANCIAL ASSETS
|--- | ----------------------------------



|                                   |                    |                  |  |  |  |               
|---------------------------------- | ------------------ | ---------------- |  |  |  | --------------
|                                   |                    | December 31,2005 |  |  |  | January 1,2005
|                                   | (Euro in millions)
|Loans and receivables to banks     |                    | 3                |  |  |  | 2             
|Loans and receivables to customers |                    | 72               |  |  |  | 45            
|Debt securities:                   |                    |                  |  |  |  |               
|Government securities              |                    | 922              |  |  |  | 1,048         
|Other public sector securities     |                    | 19               |  |  |  | 73            
|Other debt securities              |                    | 9,008            |  |  |  | 6,705         
|                                   |                    | 9,949            |  |  |  | 7,826         
|Equity shares                      |                    | 89               |  |  |  | 84            
|                                   |                    |                  |  |  |  |               
|                                   |                    | 10,113           |  |  |  | 7,957         
|                                   |                    |                  |  |  |  |               
|                                   |                    |                  | 
|                                   |                    | December 31,2005 |  |  |  | January 1,2005
|                                   | (Euro in millions)
|Of which listed:                   |                    |                  |  | 
|Debt securities                    |                    | 9,949            |  |  |  | 7,826         
|Equity instruments                 |                    | 79               |  |  |  | 78            
|Of which unlisted:                 |                    |                  |  |  |  |               
|Loans and receivables to banks     |                    | 3                |  |  |  | 2             
|Loans and receivables to customers |                    | 72               |  |  |  | 45            
|Equity shares                      |                    | 10               |  |  |  | 6             
|                                   |                    |                  |  |  |  |               
|                                   |                    | 10,113           |  |  |  | 7,957         
|                                   |                    |                  |  |  |  |               



|                                          |  |                    |  |                           |  |                    |  |       
|----------------------------------------- |  | ------------------ |  | ------------------------- |  | ------------------ |  | ------
|                                          |  | 2005              
|                                          |  | Withinone year     |  | Between oneand five years |  | Five yearsand over |  | Total 
|                                          |  | (Euro in millions)
|Analyzed by residual maturity as follows: |  |                   
|Loans and receivables to banks            |  | 3                  |  |                          |  |                   |  | 3     
|Loans and receivables to customers        |  | 40                 |  | 18                        |  | 14                 |  | 72    
|Debt securities                           |  | 1,884              |  | 4,652                     |  | 3,413              |  | 9,949 
|                                          |  |                    |  |                           |  |                    |  |       
|                                          |  | 1,927              |  | 4,670                     |  | 3,427              |  | 10,024
|                                          |  |                    |  |                           |  |                    |  |       



|24. | FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
|--- | ----------------------------------------------------------------

On transition to IFRS, certain assets held within Ark Life were designated at fair value through profit or loss. Arising from the disposal of Ark Life (note 2), at December 31, 2005 these are included within the
caption Disposal group and assets classified as held for sale (note 35).

These financial assets were also
carried at fair value under Irish GAAP, therefore, there was no change when designated as at fair value through profit or loss under IFRS.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|25. | LOANS AND RECEIVABLES TO BANKS
|--- | ------------------------------



|                                                    |                    |              |   |      |       |  
|--------------------------------------------------- | ------------------ | ------------ | - | ---- | ----- | -
|                                                    |                    | December 31, |  
|                                                    | 2005               |              |   | 2004 |      
|                                                    | (Euro in millions) |             
|Analyzed by remaining maturity:                     |                    |              |   |      |       |  
|Repayable on demand                                 |                    | 316          |   |      | 246   |  
|Other loans and advances by remaining maturity:     |                    |              |   |      |       |  
|Over 5 years                                        |                    | 146          |   |      | 127   |  
|5 years or less but over 1 year                     |                    | 11           |   |      | 30    |  
|1 year or less but over 3 months                    |                    | 376          |   |      | 279   |  
|3 months or less but not repayable on demand        |                    | 6,282        |   |      | 1,860 |  
|                                                    |                    |              |   |      |       |  
|                                                    |                    | 7,131        |   |      | 2,542 |  
|Allowance for loan losses (note 26)                 |                    | (2           | ) |      | (2    | )
|                                                    |                    |              |   |      |       |  
|                                                    |                    | 7,129        |   |      | 2,540 |  
|                                                    |                    |              |   |      |       |  
|Amounts include:                                    |                    |              |   |      |       |  
|Reverse repurchase agreements                       |                    | 2,259        |   |      | 272   |  
|Due from associated undertakings                    |                    |             |   |      | 1     |  
|                                                    |                    |              |   |      |       |  
|                                                    |                   
|                                                    |                    | December 31, |  
|                                                    | 2005               |              |   | 2004 |      
|                                                    | (Euro in millions) |             
|Loans and receivables to banks by geographical area |                    |              |   |      |       |  
|Republic of Ireland                                 |                    | 4,260        |   |      | 1,372 |  
|United States of America                            |                    | 1,366        |   |      | 81    |  
|United Kingdom                                      |                    | 677          |   |      | 685   |  
|Poland                                              |                    | 824          |   |      | 400   |  
|Rest of the world                                   |                    | 2            |   |      | 2     |  
|                                                    |                    |              |   |      |       |  
|                                                    |                    | 7,129        |   |      | 2,540 |  
|                                                    |                    |              |   |      |       |  

Under reverse repurchase agreements, the Group has accepted collateral that it is permitted to
sell or repledge in the absence of default by the owner of the collateral. The fair value of collateral received amounted to 2,259 million. The collateral received consisted of government securities of 2,171 million and other securities
of 88 million. There was no collateral sold or repledged at December 31, 2005.



126



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|26. | LOANS AND RECEIVABLES TO CUSTOMERS LESS ALLOWANCE FOR LOAN LOSSES
|--- | -----------------------------------------------------------------



|                                                                             |                    |              |   |      |        |  
|---------------------------------------------------------------------------- | ------------------ | ------------ | - | ---- | ------ | -
|                                                                             |                    | December 31, |  
|                                                                             | 2005               |              |   | 2004 |       
|                                                                             | (Euro in millions) |             
|Loans and receivables to customers(1)                                        |                    | 81,988       |   |      | 63,130 |  
|Amounts receivable under finance lease and hire purchase contracts (note 27) |                    | 2,774        |   |      | 2,495  |  
|Unquoted securities                                                          |                    | 1,287        |   |      |       |  
|                                                                             |                    |              |   |      |        |  
|                                                                             |                    | 86,049       |   |      | 65,625 |  
|Allowance for loan losses                                                    |                    | (674         | ) |      | (758   | )
|Unearned interest                                                            |                    | (143         | ) |      | (129   | )
|                                                                             |                    |              |   |      |        |  
|                                                                             |                    | 85,232       |   |      | 64,738 |  
|                                                                             |                    |              |   |      |        |  
|Analyzed by remaining maturity:                                              |                    |              |   |      |        |  
|Over 5 years                                                                 |                    | 32,583       |   |      | 26,349 |  
|5 years or less but over 1 year                                              |                    | 22,110       |   |      | 16,932 |  
|1 year or less but over 3 months                                             |                    | 15,192       |   |      | 10,177 |  
|3 months or less                                                             |                    | 16,021       |   |      | 12,038 |  
|                                                                             |                    |              |   |      |        |  
|                                                                             |                    | 85,906       |   |      | 65,496 |  
|Allowance for loan losses                                                    |                    | (674         | ) |      | (758   | )
|                                                                             |                    |              |   |      |        |  
|                                                                             |                    | 85,232       |   |      | 64,738 |  
|                                                                             |                    |              |   |      |        |  
|Of which repayable on demand or at short notice                              |                    | 21,245       |   |      | 16,640 |  
|                                                                             |                    |              |   |      |        |  
|Amounts include:                                                             |                    |              |   |      |        |  
|Due from associated undertakings                                             |                    |             |   |      |       |  
|                                                                             |                    |              |   |      |        |  

---

|(1) | At December 31, 2005 there were securities purchased under agreements to resell of
4 million (2004: 6 million).
|--- | -----------------------------------------------------------------------------------------------------------------

Amounts include reverse repurchase agreements of 4 million (2004: 6 million). The
unwind of the impairment provision discount amounting to 19 million is included in the carrying value of loans and receivables to customers. This has been credited to interest income.



|                                                       |  |                    |   |  |      |   |  |       |  
|------------------------------------------------------ |  | ------------------ | - |  | ---- | - |  | ----- | -
|                                                       |  | December 31, 2005  |  
|                                                       |  | Specific           |   |  | IBNR |   |  | Total |  
|                                                       |  | (Euro in millions) |  
|Allowance for loan losses                              |  |                    |   |  |      |   |  |       |  
|Allowance at beginning of year                         |  | 478                |   |  | 282  |   |  | 760   |  
|IFRS transition adjustment at January 1, 2005          |  | (3                 | ) |  | (143 | ) |  | (146  | )
|Currency translation adjustments                       |  | 13                 |   |  | 3    |   |  | 16    |  
|Transfer to provisions for liabilities and commitments |  |                   |   |  |     |   |  |      |  
|Charge against income                                  |  |                   |   |  | 115  |   |  | 115   |  
|Transfer to specific                                   |  | 95                 |   |  | (95  | ) |  |      |  
|Amounts charged off                                    |  | (72                | ) |  |     |   |  | (72   | )
|Recoveries of amounts previously charged off           |  | 3                  |   |  |     |   |  | 3     |  
|                                                       |  |                    |   |  |      |   |  |       |  
|Allowance at end of year                               |  | 514                |   |  | 162  |   |  | 676   |  
|                                                       |  |                    |   |  |      |   |  |       |  
|Analyzed as to:                                        |  |                    |   |  |      |   |  |       |  
|Loans and receivables to banks (note 25)               |  | 2                  |   |  |     |   |  | 2     |  
|Loans and receivables to customers                     |  | 512                |   |  | 162  |   |  | 674   |  
|                                                       |  |                    |   |  |      |   |  |       |  
|                                                       |  | 514                |   |  | 162  |   |  | 676   |  
|                                                       |  |                    |   |  |      |   |  |       |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                                                       |  |                    |   |  |         |   |  |       |  
|------------------------------------------------------ |  | ------------------ | - |  | ------- | - |  | ----- | -
|                                                       |  | December 31, 2004  |  
|                                                       |  | Specific           |   |  | General |   |  | Total |  
|                                                       |  | (Euro in millions) |  
|Allowance at beginning of year                         |  | 443                |   |  | 323     |   |  | 766   |  
|Currency translation adjustments                       |  | 23                 |   |  | 2       |   |  | 25    |  
|Transfer to provisions for liabilities and commitments |  |                   |   |  | (15     | ) |  | (15   | )
|Charge against income                                  |  |                   |   |  | 114     |   |  | 114   |  
|Transfer to specific                                   |  | 142                |   |  | (142    | ) |  |      |  
|Amounts charged off                                    |  | (151               | ) |  |        |   |  | (151  | )
|Recoveries of amounts previously charged off           |  | 21                 |   |  |        |   |  | 21    |  
|                                                       |  |                    |   |  |         |   |  |       |  
|Allowance at end of year                               |  | 478                |   |  | 282     |   |  | 760   |  
|                                                       |  |                    |   |  |         |   |  |       |  
|Analyzed as to:                                        |  |                    |   |  |         |   |  |       |  
|Loans and receivables to banks (note 25)               |  | 2                  |   |  |        |   |  | 2     |  
|Loans and receivables to customers                     |  | 476                |   |  | 282     |   |  | 758   |  
|                                                       |  |                    |   |  |         |   |  |       |  
|                                                       |  | 478                |   |  | 282     |   |  | 760   |  
|                                                       |  |                    |   |  |         |   |  |       |  



|                                                        |  |                    |  |       
|------------------------------------------------------- |  | ------------------ |  | ------
|                                                        |  | December 31,      
|                                                        |  | 2005               |  | 2004  
|                                                        |  | (Euro in millions)
|Loans and receivables to customers by geographical area |  |                    |  |       
|Republic of Ireland                                     |  | 54,571             |  | 41,494
|United States of America                                |  | 2,497              |  | 1,386 
|United Kingdom                                          |  | 24,210             |  | 18,375
|Poland                                                  |  | 3,663              |  | 3,365 
|Rest of the world                                       |  | 291                |  | 118   
|                                                        |  |                    |  |       
|                                                        |  | 85,232             |  | 64,738
|                                                        |  |                    |  |       



|27. | AMOUNTS RECEIVABLE UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS
|--- | -------------------------------------------------------------------



|                                                                        |  |                    |   |  |       |  
|----------------------------------------------------------------------- |  | ------------------ | - |  | ----- | -
|                                                                        |  | December 31,       |  
|                                                                        |  | 2005               |   |  | 2004  |  
|                                                                        |  | (Euro in millions) |  
|Gross receivables                                                       |  |                    |   |  |       |  
|Not later than 1 year                                                   |  | 1,004              |   |  | 939   |  
|Later than one year and not later than 5 years                          |  | 1,871              |   |  | 1,641 |  
|Later than 5 years                                                      |  | 146                |   |  | 167   |  
|                                                                        |  |                    |   |  |       |  
|Total                                                                   |  | 3,021              |   |  | 2,747 |  
|Unearned future finance income                                          |  | (254               | ) |  | (257  | )
|Deferred costs incurred on origination                                  |  | 7                  |   |  | 5     |  
|                                                                        |  |                    |   |  |       |  
|Total                                                                   |  | 2,774              |   |  | 2,495 |  
|                                                                        |  |                    |   |  |       |  
|Present value of minimum payments analyzed by residual maturity         |  |                    |   |  |       |  
|Not later than 1 year                                                   |  | 916                |   |  | 846   |  
|Later than one year and not later than 5 years                          |  | 1,725              |   |  | 1,489 |  
|Later than 5 years                                                      |  | 133                |   |  | 160   |  
|                                                                        |  |                    |   |  |       |  
|Present value of minimum payments                                       |  | 2,774              |   |  | 2,495 |  
|                                                                        |  |                    |   |  |       |  
|Provision for uncollectable minimum payments receivable amounted to:(1) |  | 16                 |   |  | 20    |  
|Unguaranteed residual values accruing to the benefit of the Group       |  | 12                 |   |  | 13    |  
|                                                                        |  |                    |   |  |       |  

---

|(1) | Included in the allowance for loan losses within loans and receivables to customers (note 26).
|--- | ----------------------------------------------------------------------------------------------



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|28. | FINANCIAL INVESTMENTS AVAILABLE FOR SALE
|--- | ----------------------------------------

Financial
investments in both debt securities (note 29)and equity shares (note 30)were reclassified at January 1, 2005, as either trading portfolio assets, financial investments available for sale or loans and receivables under IAS 32 and
IAS 39.

The following tables give the carrying value (fair value) of available for sale securities by major classifications together with
the unrealized gains and losses not recognized in the income statement at December 31, 2005.



|                                         |  |                    |  |                       |  |                          |   |  |                              |  |            |   |  |             
|---------------------------------------- |  | ------------------ |  | --------------------- |  | ------------------------ | - |  | ---------------------------- |  | ---------- | - |  | ------------
|                                         |  | Fair Value         |  | UnrealizedGross Gains |  | UnrealizedGross (Losses) |   |  | Net unrealizedgains/(losses) |  | Tax effect |   |  | Netafter tax
|                                         |  | (Euro in millions)
|Debt securities                          |  |                    |  |                       |  |                          |   |  |                              |  |            |   |  |             
|Irish government securities              |  | 492                |  | 10                    |  |                         |   |  | 10                           |  | (1         | ) |  | 9           
|Euro government securities               |  | 3,943              |  | 41                    |  | (12                      | ) |  | 29                           |  | (6         | ) |  | 23          
|Non Euro government securities           |  | 2,877              |  | 39                    |  | (1                       | ) |  | 38                           |  | (7         | ) |  | 31          
|Non European government securities       |  | 1,035              |  | 13                    |  | (2                       | ) |  | 11                           |  | (1         | ) |  | 10          
|U.S. Treasury & U.S. government agencies |  | 516                |  | 4                     |  | (1                       | ) |  | 3                            |  |           |   |  | 3           
|Collateralized mortgage obligations      |  | 638                |  | 1                     |  | (1                       | ) |  |                             |  |           |   |  |            
|Other asset backed securities            |  | 534                |  | 2                     |  |                         |   |  | 2                            |  |           |   |  | 2           
|Other investments                        |  | 6,658              |  | 28                    |  | (14                      | ) |  | 14                           |  | (2         | ) |  | 12          
|                                         |  |                    |  |                       |  |                          |   |  |                              |  |            |   |  |             
|Total debt securities                    |  | 16,693             |  | 138                   |  | (31                      | ) |  | 107                          |  | (17        | ) |  | 90          
|Equity shares                            |  | 171                |  | 64                    |  | (3                       | ) |  | 61                           |  | (8         | ) |  | 53          
|                                         |  |                    |  |                       |  |                          |   |  |                              |  |            |   |  |             
|Total                                    |  | 16,864             |  | 202                   |  | (34                      | ) |  | 168                          |  | (25        | ) |  | 143         
|                                         |  |                    |  |                       |  |                          |   |  |                              |  |            |   |  |             

The amount removed from equity and recognized in the income statement in respect of financial
assets available for sale amounted to 91 million during the period.



|                                                                  |  |                    |   |  |              |   |  |        |  
|----------------------------------------------------------------- |  | ------------------ | - |  | ------------ | - |  | ------ | -
|                                                                  |  | Debtsecurities     |   |  | Equityshares |   |  | Total  |  
|                                                                  |  | (Euro in millions) |  
|Analysis of movements in financial investments available for sale |  |                    |  
|At January 1, 2005                                                |  | 15,546             |   |  | 174          |   |  | 15,720 |  
|Currency translation adjustments                                  |  | 650                |   |  | 6            |   |  | 656    |  
|Purchases                                                         |  | 9,782              |   |  | 15           |   |  | 9,797  |  
|Sales                                                             |  | (5,068             | ) |  | (18          | ) |  | (5,086 | )
|Maturities                                                        |  | (4,122             | ) |  |             |   |  | (4,122 | )
|Provisions for impairment                                         |  | (1                 | ) |  | (7           | ) |  | (8     | )
|Amortization of (premiums) net of discounts                       |  | (64                | ) |  |             |   |  | (64    | )
|Movement in unrealized (losses)/gains                             |  | (30                | ) |  | 1            |   |  | (29    | )
|                                                                  |  |                    |   |  |              |   |  |        |  
|At December 31, 2005                                              |  | 16,693             |   |  | 171          |   |  | 16,864 |  
|                                                                  |  |                    |   |  |              |   |  |        |  
|Debt securities analyzed by remaining maturity                    |  |                    |   |  |              |   |  |        |  
|Due within one year                                               |  | 4,825              |   |  |              |   |  |        |  
|After one year, but within five years                             |  | 7,645              |   |  |              |   |  |        |  
|After five years, but within ten years                            |  | 2,865              |   |  |              |   |  |        |  
|After ten years                                                   |  | 1,358              |   |  |              |   |  |        |  
|                                                                  |  |                    |   |  |              |   |  |        |  
|Total at December 31, 2005                                        |  | 16,693             |   |  |              |   |  |        |  
|                                                                  |  |                    |   |  |              |   |  |        |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following tables give an analysis of the securities portfolio with unrealized losses not
recognized in the income statement at December 31, 2005, distinguishing between unrealized losses of less than 12 months and unrealized losses outstanding for periods in excess of 12 months.



|                                         |  |                                                       |  |                                                       |  |       |  |                                      |   |  |                                      |   |  |       |  
|---------------------------------------- |  | ----------------------------------------------------- |  | ----------------------------------------------------- |  | ----- |  | ------------------------------------ | - |  | ------------------------------------ | - |  | ----- | -
|                                         |  | Fair value                                            |  | Unrealized losses                                     | 
|                                         |  | Investmentswithunrealized lossesof less than12 months |  | Investmentswithunrealized lossesof more than12 months |  | Total |  | Unrealizedlossesof lessthan12 months |   |  | Unrealizedlossesof morethan12 months |   |  | Total |  
|                                         |  | (Euro in millions)                                    | 
|Debt securities                          |  |                                                       |  |                                                       |  |       |  |                                      |   |  |                                      |   |  |       |  
|Euro government securities               |  | 1,804                                                 |  | 221                                                   |  | 2,025 |  | (10                                  | ) |  | (2                                   | ) |  | (12   | )
|Non Euro government securities           |  | 1,638                                                 |  | 196                                                   |  | 1,834 |  | (1                                   | ) |  |                                     |   |  | (1    | )
|Non European government securities       |  | 137                                                   |  | 81                                                    |  | 218   |  |                                     |   |  | (2                                   | ) |  | (2    | )
|U.S. Treasury & U.S. government agencies |  | 102                                                   |  | 13                                                    |  | 115   |  | (1                                   | ) |  |                                     |   |  | (1    | )
|Collateralized mortgage obligations      |  | 313                                                   |  | 43                                                    |  | 356   |  | (1                                   | ) |  |                                     |   |  | (1    | )
|Other investments                        |  | 1,931                                                 |  | 386                                                   |  | 2,317 |  | (12                                  | ) |  | (2                                   | ) |  | (14   | )
|                                         |  |                                                       |  |                                                       |  |       |  |                                      |   |  |                                      |   |  |       |  
|Total debt securities                    |  | 5,925                                                 |  | 940                                                   |  | 6,865 |  | (25                                  | ) |  | (6                                   | ) |  | (31   | )
|Equity shares                            |  | 6                                                     |  |                                                      |  | 6     |  |                                     |   |  | (3                                   | ) |  | (3    | )
|                                         |  |                                                       |  |                                                       |  |       |  |                                      |   |  |                                      |   |  |       |  
|Total                                    |  | 5,931                                                 |  | 940                                                   |  | 6,871 |  | (25                                  | ) |  | (9                                   | ) |  | (34   | )
|                                         |  |                                                       |  |                                                       |  |       |  |                                      |   |  |                                      |   |  |       |  

Available for sale financial investments with unrealized losses of more than twelve months have
been assessed for impairment and based on the credit risk profile of the counterparties involved, it has been determined that impairment has not arisen at this time.



|29. | DEBT SECURITIES
|--- | ---------------

Financial investments in both debt
securities and equity shares were reclassified at January 1, 2005, as either trading portfolio assets, financial investments available for sale or loans and receivables under IAS 32 and IAS 39.

The following tables show the analysis of debt securities under Irish GAAP for 2004.



|                                                  |  |                    |  |                      |  |                       |   |  |            
|------------------------------------------------- |  | ------------------ |  | -------------------- |  | --------------------- | - |  | -----------
|                                                  |  | December 31, 2004 
|                                                  |  | Bookamount         |  | Grossunrealizedgains |  | Grossunrealizedlosses |   |  | Marketvalue
|                                                  |  | (Euro in millions)
|Held as financial fixed assets                    |  |                    |  |                      |  |                       |   |  |            
|Issued by public bodies:                          |  |                    |  |                      |  |                       |   |  |            
|Government securities                             |  | 7,101              |  | 137                  |  | (11                   | ) |  | 7,227      
|Other public sector securities                    |  | 854                |  | 13                   |  |                      |   |  | 867        
|Issued by other issuers:                          |  |                    |  |                      |  |                       |   |  |            
|Bank and building society certificates of deposit |  | 585                |  |                     |  |                      |   |  | 585        
|Other debt securities                             |  | 7,710              |  | 119                  |  | (6                    | ) |  | 7,823      
|                                                  |  |                    |  |                      |  |                       |   |  |            
|                                                  |  | 16,250             |  | 269                  |  | (17                   | ) |  | 16,502     
|                                                  |  |                    |  |                      |  |                       |   |  |            
|Held for trading purposes                         |  |                    |  |                      |  |                       |   |  |            
|Issued by public bodies:                          |  |                    |  |                      |  |                       |   |  |            
|Government securities                             |  | 1,473              |  |                      |  |                       |   |  | 1,473      
|Other public sector securities                    |  | 73                 |  |                      |  |                       |   |  | 73         
|Issued by other issuers:                          |  |                    |  |                      |  |                       |   |  |            
|Bank and building society certificates of deposit |  |                   |  |                      |  |                       |   |  |           
|Other debt securities                             |  | 6,705              |  |                      |  |                       |   |  | 6,705      
|                                                  |  |                    |  |                      |  |                       |   |  |            
|                                                  |  | 8,251              |  |                     |  |                      |   |  | 8,251      
|                                                  |  |                    |  |                      |  |                       |   |  |            
|                                                  |  | 24,501             |  | 269                  |  | (17                   | ) |  | 24,753     
|                                                  |  |                    |  |                      |  |                       |   |  |            

Market value is market price for quoted securities and directors estimate for unquoted securities.



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Notes to Consolidated Financial Statements - (Continued)



|                               |  |                   
|------------------------------ |  | ------------------
|                               |  | December 31, 2004 
|                               |  | (Euro in millions)
|Analyzed by remaining maturity |  |                   
|Due within one year            |  | 4,119             
|Due one year and over          |  | 20,382            
|                               |  |                   
|Total at December 31, 2004     |  | 24,501            
|                               |  |                   



|                                      |  |                    |  |            
|------------------------------------- |  | ------------------ |  | -----------
|                                      |  | December 31, 2004 
|                                      |  | BookAmount         |  | MarketValue
|                                      |  | (Euro in millions)
|Analyzed by listing status            |  |                   
|Held as financial fixed assets        |  |                    |  |            
|Listed on a recognized stock exchange |  | 14,076             |  | 14,325     
|Quoted elsewhere                      |  | 376                |  | 376        
|Unquoted                              |  | 1,798              |  | 1,801      
|                                      |  |                    |  |            
|                                      |  | 16,250             |  | 16,502     
|                                      |  |                    |  |            
|Held for trading purposes             |  |                    |  |            
|Listed on a recognized stock exchange |  | 7,985              |  |            
|Quoted elsewhere                      |  | 266                |  |            
|                                      |  |                    |  |            
|                                      |  | 8,251              |  |            
|                                      |  |                    |  |            
|                                      |  | 24,501             |  |            
|                                      |  |                    |  |            

Debt securities subject to repurchase agreements amounted to 8,780 million.

Subordinated debt securities included as financial fixed assets amounted to 126 million.

The unamortized premiums net of discounts on debt securities held as financial fixed assets amounted to 53 million. The cost of debt securities held for trading purposes amounted to 8,186 million.



|                                                                        |  |                    |   |  |                      |   |  |                   |   |  |            |  
|----------------------------------------------------------------------- |  | ------------------ | - |  | -------------------- | - |  | ----------------- | - |  | ---------- | -
|                                                                        |  | Cost               |   |  | Discountsandpremiums |   |  | Amountswrittenoff |   |  | Bookamount |  
|                                                                        |  | (Euro in millions) |  
|Analysis of movements in debt securities held as financial fixed assets |  |                    |  
|At January 1, 2004                                                      |  | 12,430             |   |  | 33                   |   |  | (18               | ) |  | 12,445     |  
|Currency translation adjustments                                        |  | (294               | ) |  | 1                    |   |  | (1                | ) |  | (294       | )
|Purchases                                                               |  | 14,281             |   |  |                     |   |  |                  |   |  | 14,281     |  
|Realizations/maturities                                                 |  | (10,174            | ) |  | 7                    |   |  | 5                 |   |  | (10,162    | )
|Credit to statement of income (note 11)                                 |  |                   |   |  |                     |   |  | 4                 |   |  | 4          |  
|Amortization of (premiums) net of discounts                             |  |                   |   |  | (24                  | ) |  |                  |   |  | (24        | )
|                                                                        |  |                    |   |  |                      |   |  |                   |   |  |            |  
|At December 31, 2004                                                    |  | 16,243             |   |  | 17                   |   |  | (10               | ) |  | 16,250     |  
|                                                                        |  |                    |   |  |                      |   |  |                   |   |  |            |  



|30. | EQUITY SHARES
|--- | -------------

The following tables show the
analysis of equity shares under Irish GAAP for 2004.



|                                      |  |                    |  |                      |  |                       |   |  |            
|------------------------------------- |  | ------------------ |  | -------------------- |  | --------------------- | - |  | -----------
|                                      |  | December 31, 2004 
|                                      |  | Bookamount         |  | Grossunrealizedgains |  | Grossunrealizedlosses |   |  | Marketvalue
|                                      |  | (Euro in millions)
|Held as financial fixed assets        |  |                    |  |                      |  |                       |   |  |            
|Listed on a recognized stock exchange |  | 5                  |  | 15                   |  | (1                    | ) |  | 19         
|Unquoted                              |  | 106                |  | 9                    |  | (3                    | ) |  | 112        
|                                      |  |                    |  |                      |  |                       |   |  |            
|                                      |  | 111                |  | 24                   |  | (4                    | ) |  | 131        
|                                      |  |                    |  |                      |  |                       |   |  |            
|Held for trading purposes             |  |                    |  |                      |  |                       |   |  |            
|Listed on a recognized stock exchange |  | 1,524              |  |                     |  |                      |   |  | 1,524      
|Unquoted                              |  | 6                  |  |                     |  |                      |   |  | 6          
|                                      |  |                    |  |                      |  |                       |   |  |            
|                                      |  | 1,530              |  |                     |  |                      |   |  | 1,530      
|                                      |  |                    |  |                      |  |                       |   |  |            
|                                      |  | 1,641              |  | 24                   |  | (4                    | ) |  | 1,661      
|                                      |  |                    |  |                      |  |                       |   |  |            

Market value is market price for quoted securities and directors estimate for unquoted securities.



131



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                                                                      |  |                    |   |  |                   |   |  |            |  
|--------------------------------------------------------------------- |  | ------------------ | - |  | ----------------- | - |  | ---------- | -
|                                                                      |  | Cost               |   |  | Amountswrittenoff |   |  | Bookamount |  
|                                                                      |  | (Euro in millions) |  
|Analysis of movements in equity shares held as financial fixed assets |  |                    |  
|At January 1, 2004                                                    |  | 158                |   |  | (42               | ) |  | 116        |  
|Charge against statement of income                                    |  |                   |   |  | (3                | ) |  | (3         | )
|Currency translation adjustments                                      |  | 2                  |   |  |                  |   |  | 2          |  
|Purchases                                                             |  | 6                  |   |  |                  |   |  | 6          |  
|Disposals                                                             |  | (15                | ) |  | 5                 |   |  | (10        | )
|                                                                      |  |                    |   |  |                   |   |  |            |  
|At December 31, 2004                                                  |  | 151                |   |  | (40               | ) |  | 111        |  
|                                                                      |  |                    |   |  |                   |   |  |            |  



|31. | INTERESTS IN ASSOCIATED UNDERTAKINGS
|--- | ------------------------------------



|                                                      |  |                          |   |  |       |  
|----------------------------------------------------- |  | ------------------------ | - |  | ----- | -
|                                                      |  | Years ended December 31, |  
|                                                      |  | 2005                     |   |  | 2004  |  
|                                                      |  | (Euro in millions)       |  
|Share of net assets including goodwill                |  |                          |  
|At January 1                                          |  | 1,379                    |   |  | 1,361 |  
|IFRS transition adjustments                           |  | 16                       |   |  |      |  
|Currency translation adjustments                      |  | 225                      |   |  | (101  | )
|Purchases                                             |  | 3                        |   |  | 7     |  
|Disposals                                             |  | (4                       | ) |  |      |  
|Income for the period                                 |  | 149                      |   |  | 132   |  
|Dividends                                             |  | (41                      | ) |  | (37   | )
|Unrealized losses on available for sale assets        |  | (13                      | ) |  |      |  
|Actuarial loss recognized in retirement benefit plans |  |                         |   |  | (1    | )
|Share based payment                                   |  | 7                        |   |  | 6     |  
|Other movements                                       |  | (65                      | ) |  | 12    |  
|                                                      |  |                          |   |  |       |  
|At December 31                                        |  | 1,656                    |   |  | 1,379 |  
|                                                      |  |                          |   |  |       |  

Included in the Groups share of net assets of associates is goodwill as follows:



|                                 |  |                          |  |      |  
|-------------------------------- |  | ------------------------ |  | ---- | -
|                                 |  | Years ended December 31, | 
|                                 |  | 2005                     |  | 2004 |  
|                                 |  | (Euro in millions)       | 
|Goodwill                         |  |                          | 
|Balance at January 1             |  | 917                      |  | 981  |  
|Additions during year(1)         |  |                         |  | 8    |  
|Currency translation adjustments |  | 141                      |  | (72  | )
|                                 |  |                          |  |      |  
|At December 31                   |  | 1,058                    |  | 917  |  
|                                 |  |                          |  |      |  



|(1) | 5 million of the goodwill arising during 2004 relates to the finalization of the
M&T fair value adjustments reflecting an adjustment to other liabilities, in respect of the dilutive impact of the M&T employee stock options outstanding on AIBs interest in M&T. The remainder relates to acquisitions during the
year.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  |                               
|-------------------------------- |  | ------------------------------
|Principal associated undertaking |  | Nature of business            
|M&T Bank Corporation(2)          |  | Banking and financial services



|                   |  |                                                                           
|------------------ |  | --------------------------------------------------------------------------
|Registered office: |  | One M&T Plaza, Buffalo, New York 14203, USA                               
|                   |  | (Common stock shares of US $0.50 par value each  Group interest 23.8%(2))



|(2) | The Group interest is held directly by Allied Irish Banks, p.l.c. and carried at cost at 891 million in the parent company balance sheet. AIB accounts for
its share of profits of M&T on the basis of its average interest in M&T throughout the period, which amounted to 23.5% during 2005 (2004: 22. 7%). The agreement with M&T provides for the maintenance of AIBs interest in M&T at
22.5% through share repurchase programmes effected by M&T and through rights provided to AIB which allow it to subscribe for additional shares in M&T at fair market value.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of the investment in the Groups principal associated undertaking at December 31, 2005 was 2,468 million (2004: 2,114 million).



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The summary consolidated income statement, summary balance sheet and contribution of M&T Bank
Corporation for 2005 and 2004 under IFRS are as follows:



|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|-------------------------- |  | -------------------------- | - |  | --------------------------------------------------- |  | -------------------------- | - |  | -------------------------- | -
|Year endedDecember 31,2004 |  | Year endedDecember 31,2005 |   |  |                                                     |  | Year endedDecember 31,2005 |   |  | Year endedDecember 31,2004 |  
|(US$ in millions)          |  |                            |   |  | (Euro in millions)                                  | 
|                           |  |                            |   |  | Summary of consolidated income statement            |  |                            |   |  |                            |  
|1,613                      |  | 1,713                      |   |  | Net interest income                                 |  | 1,372                      |   |  | 1,293                      |  
|949                        |  | 967                        |   |  | Other income                                        |  | 775                        |   |  | 761                        |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|2,562                      |  | 2,680                      |   |  | Total operating income                              |  | 2,147                      |   |  | 2,054                      |  
|1,409                      |  | 1,410                      |   |  | Total operating expenses                            |  | 1,129                      |   |  | 1,130                      |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|1,153                      |  | 1,270                      |   |  | Group operating income before impairment provisions |  | 1,018                      |   |  | 924                        |  
|95                         |  | 43                         |   |  | Impairment provisions                               |  | 34                         |   |  | 76                         |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|1,058                      |  | 1,227                      |   |  | Group income before taxation                        |  | 984                        |   |  | 848                        |  
|335                        |  | 409                        |   |  | Taxation                                            |  | 328                        |   |  | 269                        |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|723                        |  | 818                        |   |  | Group income after taxation                         |  | 656                        |   |  | 579                        |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|                           |  |                            |   | 
|December 31,2004           |  | December 31,2005           |   |  |                                                     |  | December 31,2005           |   |  | December 31,2004           |  
|(US$ in millions)          |  |                            |   |  | (Euro in millions)                                  | 
|                           |  |                            |   |  | Summary of consolidated balance sheet               |  |                            |   |  |                            |  
|39,508                     |  | 41,698                     |   |  | Cash, loans and receivables                         |  | 35,346                     |   |  | 29,005                     |  
|8,516                      |  | 8,400                      |   |  | Investment securities                               |  | 7,120                      |   |  | 6,252                      |  
|367                        |  | 337                        |   |  | Fixed assets                                        |  | 286                        |   |  | 270                        |  
|1,685                      |  | 1,990                      |   |  | Other assets                                        |  | 1,687                      |   |  | 1,237                      |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|50,076                     |  | 52,425                     |   |  | Total assets                                        |  | 44,439                     |   |  | 36,764                     |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|35,493                     |  | 37,144                     |   |  | Deposits                                            |  | 31,486                     |   |  | 26,058                     |  
|11,221                     |  | 11,495                     |   |  | Other borrowings                                    |  | 9,744                      |   |  | 8,238                      |  
|762                        |  | 903                        |   |  | Other liabilities                                   |  | 765                        |   |  | 559                        |  
|2,600                      |  | 2,883                      |   |  | Stockholders funds                                 |  | 2,444                      |   |  | 1,909                      |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|50,076                     |  | 52,425                     |   |  | Total liabilities and stockholders funds           |  | 44,439                     |   |  | 36,764                     |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|                           |  |                            |   | 
|Year endedDecember 31,2004 |  | Year endedDecember 31,2005 |   |  |                                                     |  | Year endedDecember 31,2005 |   |  | Year endedDecember 31,2004 |  
|(US$ in millions)          |  |                            |   |  | (Euro in millions)                                  | 
|                           |  |                            |   |  | Contribution of M&T                                 |  |                            |   |  |                            |  
|240                        |  | 288                        |   |  | Gross contribution                                  |  | 230                        |   |  | 192                        |  
|(82)                       |  | (103                       | ) |  | Taxation                                            |  | (82                        | ) |  | (65                        | )
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  
|158                        |  | 185                        |   |  | Contribution to Group income before taxation        |  | 148                        |   |  | 127                        |  
|                           |  |                            |   |  |                                                     |  |                            |   |  |                            |  

With the exception of M&T, the Groups interests in associated undertakings are non-credit institutions,
are unlisted and are held by subsidiary undertakings.

In accordance with the European Communities (Credit Institutions: Accounts)
Regulations, 1992, Allied Irish Banks, p.l.c. will annex a full listing of associated undertakings to its annual return to the companies registration office.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|32. | INTANGIBLE ASSETS AND GOODWILL
|--- | ------------------------------



|                                   |  |                    |   |  |          |  |       |  
|---------------------------------- |  | ------------------ | - |  | -------- |  | ----- | -
|                                   |  | Goodwill           |   |  | Software |  | Total |  
|                                   |  | (Euro in millions) |  
|At January 1, 2004                 |  | 420                |   |  | 192      |  | 612   |  
|Additions                          |  |                   |   |  | 66       |  | 66    |  
|Currency translation adjustments   |  | (2                 | ) |  | 1        |  | (1    | )
|                                   |  |                    |   |  |          |  |       |  
|At December 31, 2004               |  | 418                |   |  | 259      |  | 677   |  
|Additions                          |  |                   |   |  | 36       |  | 36    |  
|Currency translation adjustments   |  | 4                  |   |  | 8        |  | 12    |  
|Disposals                          |  | (17                | ) |  |         |  | (17   | )
|                                   |  |                    |   |  |          |  |       |  
|At December 31, 2005               |  | 405                |   |  | 303      |  | 708   |  
|                                   |  |                    |   |  |          |  |       |  
|Amortization and impairment losses |  |                    |   |  |          |  |       |  
|At January 1, 2004                 |  |                   |   |  | 75       |  | 75    |  
|Amortization for the year          |  |                   |   |  | 50       |  | 50    |  
|Impairment charge                  |  | 13                 |   |  |         |  | 13    |  
|Currency translation adjustments   |  | (2                 | ) |  | 1        |  | (1    | )
|                                   |  |                    |   |  |          |  |       |  
|Balance at December 31, 2004       |  | 11                 |   |  | 126      |  | 137   |  
|Amortization for the year          |  |                   |   |  | 45       |  | 45    |  
|Impairment charge                  |  | 2                  |   |  |         |  | 2     |  
|Currency translation adjustments   |  | 2                  |   |  | 5        |  | 7     |  
|                                   |  |                    |   |  |          |  |       |  
|At December 31, 2005               |  | 15                 |   |  | 176      |  | 191   |  
|                                   |  |                    |   |  |          |  |       |  
|Net book value                     |  |                    |   |  |          |  |       |  
|At January 1, 2004                 |  | 420                |   |  | 117      |  | 537   |  
|At December 31, 2004               |  | 407                |   |  | 133      |  | 540   |  
|At December 31, 2005               |  | 390                |   |  | 127      |  | 517   |  
|                                   |  |                    |   |  |          |  |       |  

The goodwill relates principally to the acquisition of the holding in Bank Zachodni WBK S.A.
(BZWBK). The investment in BZWBK which is quoted on a recognized stock exchange has been assessed for impairment at December 31, 2005 and 2004. The market value at December 31, 2005 of the shareholding in BZWBK S.A. of
1.9 billion exceeds the carrying amount including goodwill of the investment by 0.6 billion.

The remaining goodwill amounts
which relate to unquoted investments, have been assessed for impairment through discounting projected cash flows with the resultant impairment charge, if any, recognized in the period.

Other intangible assets comprising computer software which is not integral to hardware were reclassified on IFRS transition from property, plant and
equipment. Additionally, internally generated intangible assets were capitalized. Internally generated intangible assets under construction at December 31, 2005 amounted to 21 million (2004: 5 million).



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|33. | PROPERTY, PLANT AND EQUIPMENT
|--- | -----------------------------



|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|---------------------------------------- |  | ------------------ | - |  | ------------- | - |  | ---------------------- | - |  | ---- | - |  | ----- | -
|                                         |  | Property           |   |  | Equipment     |   |  | Total                  |  
|                                         |  | Freehold           |   |  | Longleasehold |   |  | Leaseholdunder 50years |   |  |     
|                                         |  | (Euro in millions) |  
|Cost:                                    |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At January 1, 2005                       |  | 537                |   |  | 93            |   |  | 139                    |   |  | 517  |   |  | 1,286 |  
|Disposals/transfers of Group undertaking |  | (51                | ) |  |              |   |  | (1                     | ) |  | (2   | ) |  | (54   | )
|Additions                                |  | 21                 |   |  | 7             |   |  | 8                      |   |  | 64   |   |  | 100   |  
|Disposals                                |  | (19                | ) |  | (1            | ) |  |                       |   |  | (45  | ) |  | (65   | )
|Currency translation adjustments         |  | 10                 |   |  |              |   |  | 4                      |   |  | 16   |   |  | 30    |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At December 31, 2005                     |  | 498                |   |  | 99            |   |  | 150                    |   |  | 550  |   |  | 1,297 |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|Accumulated depreciation:                |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At January 1, 2005                       |  | 90                 |   |  | 16            |   |  | 85                     |   |  | 350  |   |  | 541   |  
|Disposal of Group undertaking            |  |                   |   |  |              |   |  |                       |   |  | (2   | ) |  | (2    | )
|Depreciation charge for the year         |  | 16                 |   |  | 2             |   |  | 8                      |   |  | 57   |   |  | 83    |  
|Disposals                                |  | (12                | ) |  |              |   |  |                       |   |  | (33  | ) |  | (45   | )
|Currency translation adjustments         |  | 2                  |   |  |              |   |  | 2                      |   |  | 10   |   |  | 14    |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At December 31, 2005                     |  | 96                 |   |  | 18            |   |  | 95                     |   |  | 382  |   |  | 591   |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|Net book value:                          |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At December 31, 2005                     |  | 402                |   |  | 81            |   |  | 55                     |   |  | 168  |   |  | 706   |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|                                         |  |                    |  
|                                         |  | Property           |   |  | Equipment     |   |  | Total                  |  
|                                         |  | Freehold           |   |  | Longleasehold |   |  | Leaseholdunder 50years |   |  |     
|                                         |  | (Euro in millions) |  
|Cost:                                    |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At January 1, 2004                       |  | 513                |   |  | 90            |   |  | 130                    |   |  | 631  |   |  | 1,364 |  
|Disposal of Group undertaking            |  |                   |   |  |              |   |  |                       |   |  | (7   | ) |  | (7    | )
|Additions                                |  | 19                 |   |  | 3             |   |  | 13                     |   |  | 33   |   |  | 68    |  
|Disposals                                |  | (16                | ) |  |              |   |  | (3                     | ) |  | (174 | ) |  | (193  | )
|Currency translation adjustments         |  | 21                 |   |  |              |   |  | (1                     | ) |  | 34   |   |  | 54    |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At December 31, 2004                     |  | 537                |   |  | 93            |   |  | 139                    |   |  | 517  |   |  | 1,286 |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|Accumulated depreciation:                |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At January 1, 2004                       |  | 69                 |   |  | 13            |   |  | 79                     |   |  | 450  |   |  | 611   |  
|Disposals of Group undertaking           |  |                   |   |  |              |   |  |                       |   |  | (6   | ) |  | (6    | )
|Depreciation charge for the year         |  | 14                 |   |  | 3             |   |  | 6                      |   |  | 59   |   |  | 82    |  
|Impairment losses                        |  | 9                  |   |  |              |   |  |                       |   |  |     |   |  | 9     |  
|Disposals                                |  | (10                | ) |  |              |   |  |                       |   |  | (172 | ) |  | (182  | )
|Currency translation adjustments         |  | 8                  |   |  |              |   |  |                       |   |  | 19   |   |  | 27    |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At December 31, 2004                     |  | 90                 |   |  | 16            |   |  | 85                     |   |  | 350  |   |  | 541   |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|Net book value:                          |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  
|At December 31, 2004                     |  | 447                |   |  | 77            |   |  | 54                     |   |  | 167  |   |  | 745   |  
|                                         |  |                    |   |  |               |   |  |                        |   |  |      |   |  |       |  

At January 1, 2004, on transition to IFRS, computer software which was not integral to
hardware was reclassified from equipment to intangible assets (net book value 88 million).

The net book value of property occupied
by the Group for its own activities was 531 million (2004: 516 million). Property leased to others had a book value of 7 million (2004: 11 million). Included in the carrying amount of property and equipment is expenditure
recognized for both property and equipment in the course of construction amounting to 4 million and 6 million respectively (2004: 19 million and 3 million).



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|34. | DEFERRED TAXATION
|--- | -----------------

The tax effects of temporary
timing differences that give rise to significant elements of the deferred tax assets and deferred tax liabilities at December 31, 2005 and 2004 are presented below.



|                                                                                                                       |  |                    |   |  |      |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------ | - |  | ---- | -
|                                                                                                                       |  | December 31,       |  
|                                                                                                                       |  | 2005               |   |  | 2004 |  
|                                                                                                                       |  | (Euro in millions) |  
|Deferred tax assets:                                                                                                   |  |                    |   |  |      |  
|Allowance for loans losses                                                                                             |  | (84                | ) |  | (99  | )
|Amortized income                                                                                                       |  | (3                 | ) |  | (28  | )
|Debt securities                                                                                                        |  |                   |   |  | (11  | )
|Retirement benefits                                                                                                    |  | (221               | ) |  | (165 | )
|Timing difference on provisions for future commitments in relation to the funding of Icarom plc (under Administration) |  | (9                 | ) |  | (10  | )
|Other                                                                                                                  |  | (30                | ) |  |     |  
|                                                                                                                       |  |                    |   |  |      |  
|Total gross deferred tax assets                                                                                        |  | (347               | ) |  | (313 | )
|                                                                                                                       |  |                    |   |  |      |  
|Deferred tax liabilities:                                                                                              |  |                    |   |  |      |  
|Assets leased to customers                                                                                             |  | 45                 |   |  | 46   |  
|Assets used in the business                                                                                            |  | 34                 |   |  | 7    |  
|Debt securities                                                                                                        |  | 19                 |   |  | 22   |  
|Cash flow hedges                                                                                                       |  | 28                 |   |  |     |  
|Other                                                                                                                  |  |                   |   |  | 62   |  
|                                                                                                                       |  |                    |   |  |      |  
|Total gross deferred tax liabilities                                                                                   |  | 126                |   |  | 137  |  
|                                                                                                                       |  |                    |   |  |      |  
|Net deferred tax assets                                                                                                |  | (221               | ) |  | (176 | )
|                                                                                                                       |  |                    |   |  |      |  
|Represented on the balance sheet as follows:                                                                           |  |                    |   |  |      |  
|Deferred tax assets                                                                                                    |  | (253               | ) |  | (228 | )
|Deferred tax liabilities                                                                                               |  | 32                 |   |  | 52   |  
|                                                                                                                       |  |                    |   |  |      |  
|                                                                                                                       |  | (221               | ) |  | (176 | )
|                                                                                                                       |  |                    |   |  |      |  

For each of the years ended December 31, 2005 and 2004 full provision has been made for capital allowances
and other temporary timing differences.



|                                                    |  |                          |   |  |      |  
|--------------------------------------------------- |  | ------------------------ | - |  | ---- | -
|                                                    |  | Years ended December 31, |  
|                                                    |  | 2005                     |   |  | 2004 |  
|                                                    |  | (Euro in millions)       |  
|Analysis of movements in deferred taxation:         |  |                          |   |  |      |  
|At January 1                                        |  | (176                     | ) |  | (107 | )
|IFRS transition adjustment                          |  | 10                       |   |  |     |  
|Currency translation and other adjustments          |  | (11                      | ) |  | (22  | )
|Deferred tax through equity                         |  | (60                      | ) |  | (29  | )
|Income statement taxation (charge)/credit (note 16) |  | 16                       |   |  | (18  | )
|                                                    |  |                          |   |  |      |  
|At December 31                                      |  | (221                     | ) |  | (176 | )
|                                                    |  |                          |   |  |      |  

Deferred tax assets have not been recognized in respect of tax losses amounting to 49 million (2004:
43 million). The majority of these tax losses relate to capital losses that have no expiration date. The net deferred tax asset on items recognized directly in equity amounted to 144 million (2004: 142 million).

The following is a breakdown of deferred tax assets and deferred tax liabilities by jurisdiction;

Deferred tax assets: Republic of Ireland - 95 million: Northern Ireland/Great Britain - 129 million: Isle of Man/Channel Islands - 1 million: Poland - 28 million.

Deferred tax liabilities: United States of America - 32 million.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|35. | LONG-TERM ASSURANCE BUSINESS
|--- | ----------------------------

On November 22,
2005, AIB announced that it had agreed the terms of a joint venture with Aviva Group p.l.c for the manufacture and distribution of life and pensions products in the Republic of Ireland. The joint venture brings together Hibernian Life &
Pensions Limited and Ark Life Assurance Company Limited (Ark Life).

As set out in note 2, the income from Ark Life that is
determined to relate to discontinued operations is shown, on an after tax basis, as a one line item on the face of the income statement. Prior year numbers have been restated.

Ark Life assets and liabilities have been included in the balance sheet at December 31, 2005 as a disposal group classified as held for sale.
Comparatives have not been restated.

Methodology

2005

International Financial Reporting Standard 4, Insurance Contracts, (IFRS 4) requires all products issued
to be classified for accounting purposes as either insurance or investment contracts, depending on whether significant insurance risks exist. In the case of a life contract, insurance risk exists if the amount payable on the occurrence of an insured
event exceeds the assets backing the contract, or could do so in certain circumstances, and the product of the probability of the insured event occurring and the excess amount payable has commercial substance. In particular, guaranteed equity bonds
which guarantee a return of the original premium irrespective of the current value of the backing assets are deemed to be insurance contracts notwithstanding that at the balance sheet date there may be no excess of the original premium over the
backing assets. Insurance contracts will continue to be accounted under the Companys existing accounting policies, namely the embedded value method.

For contracts which are not insurance contracts the appropriate IFRS standards, and in particular IAS 18 Revenue (IAS 18) and IAS 39 Financial instruments: recognition and
measurement, (IAS 39) are applied. Unit linked liabilities are deemed equal to the value of units attaching to contracts at the balance sheet date. Certain upfront fees and charges have been deferred and included within an explicit
deferred income reserve. Whilst IAS 18 does allow for the deferral of directly variable acquisition costs such as commissions, no such deferrable costs exist upon Group consolidation.

2004

The value of the stockholders interest in the long-term assurance business (the
embedded value) is comprised of the net tangible assets of Ark Life Assurance Company Limited (Ark Life), including any surplus retained in the long-term business funds, which could be transferred to stockholders, and the present
value of the in-force business. The value of the in-force business is calculated by projecting future surpluses and other net cash flows attributable to the stockholders arising from business written by the balance sheet date and discounting the
result at a risk discount rate.

Surpluses arise following annual actuarial valuations of the long-term business funds, which are carried
out in accordance with the statutory requirements designed to ensure and demonstrate the solvency of the funds. Future surpluses will depend on experience in a number of areas such as investment returns, lapse rates, mortality and administrative
expenses. Surpluses can be projected by making realistic assumptions about future experience, having regard to both actual experience and forecast long-term economic trends. Other net cash flows principally comprise annual management charges and
other fees levied upon the policyholders by Ark Life.

Income and expense from long-term assurance business included in
the income statement is set out below:



|                                                                      |  |                          |  |     
|--------------------------------------------------------------------- |  | ------------------------ |  | ----
|                                                                      |  | Years ended December 31,
|                                                                      |  | 2005                     |  | 2004
|Income and expense from Ark Lifes long-term assurance business       |  | (Euro in millions)      
|Net interest income                                                   |  | 113                      |  | 62  
|Other income                                                          |  | 740                      |  | 342 
|                                                                      |  |                          |  |     
|Total operating income                                                |  | 853                      |  | 404 
|Increase in insurance and investment contract liabilities, and claims |  | 762                      |  | 309 
|Total operating expenses                                              |  | 27                       |  | 26  
|                                                                      |  |                          |  |     
|Income before taxation                                                |  | 64                       |  | 69  
|Taxation                                                              |  | 4                        |  | 6   
|                                                                      |  |                          |  |     
|Income after taxation                                                 |  | 60                       |  | 63  
|                                                                      |  |                          |  |     
|Analysed as to:                                                       |  |                          |  |     
|Continuing operations                                                 |  | 14                       |  | 10  
|Discontinued operations                                               |  | 46                       |  | 53  
|                                                                      |  |                          |  |     

Some elements of the Ark Life business are being retained within the Group and this gives rise to
the difference between the amounts recognized above and those disclosed as discontinued operations.

The taxation expense is analysed as
follows: Continuing operations 1 million (2004: 1 million); discontinued operations  3 million (2004: 5 million).



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Assumptions

As
explained on the previous page insurance contracts continue to be valued using embedded value principles. Following a review of demographic experience and having regard to the less than 50 bp change in bond yields during the year the demographic and
economic assumptions were left unchanged. Maintenance expense assumptions were increased for one years inflation.



|                                   |  |                          |  |      
|---------------------------------- |  | ------------------------ |  | -----
|                                   |  | Years ended December 31,
|                                   |  | 2005                     |  | 2004 
|                                   |  | %                        |  | %    
|Risk adjusted discount rate        |  | 7.5                      |  | 7.5  
|Weighted average investment return |  | 5.875                    |  | 5.875
|Future expense inflation           |  | 4.0                      |  | 4.0  
|Corporation tax rate               |  | 12.5                     |  | 12.5 

Balance sheet

The assets and liabilities of Ark Life included in the consolidated balance sheet of the Group are as follows:



|                                                 |  |                    |  |                |  |                 
|------------------------------------------------ |  | ------------------ |  | -------------- |  | ----------------
|                                                 |  | December 31,2005   |  | January 1,2005 |  | December 31,2004
|                                                 |  | (Euro in millions)
|Assets                                           |  |                    |  |                |  |                 
|Loans and receivables to banks                   |  | 191                |  | 220            |  | 220             
|Assets held at fair value through profit or loss |  | 2,638              |  | 1,871          |  |                
|Debt securities                                  |  |                   |  |               |  | 425             
|Equity shares                                    |  |                   |  |               |  | 1,446           
|Property, plant and equipment                    |  | 52                 |  | 51             |  | 51              
|Reinsurance assets                               |  | 748                |  | 601            |  |                
|Placings with group companies                    |  | 1,428              |  | 1,246          |  | 1,246           
|Other assets                                     |  | 371                |  | 255            |  | 440             
|                                                 |  |                    |  |                |  |                 
|Total assets                                     |  | 5,428              |  | 4,244          |  | 3,828           
|                                                 |  |                    |  |                |  |                 
|Liabilities                                      |  |                    |  |                |  |                 
|Investment contract liabilities                  |  | 2,953              |  | 2,422          |  | 2,422           
|Insurance contract liabilities                   |  | 1,923              |  | 1,465          |  | 864             
|Other liabilities                                |  | 215                |  | 75             |  | 75              
|                                                 |  |                    |  |                |  |                 
|Total liabilities                                |  | 5,091              |  | 3,962          |  | 3,361           
|                                                 |  |                    |  |                |  |                 
|Stockholders equity                             |  | 337                |  | 282            |  | 467             
|                                                 |  |                    |  |                |  |                 
|Total liabilities and stockholders equity       |  | 5,428              |  | 4,244          |  | 3,828           
|                                                 |  |                    |  |                |  |                 

Presentation in the Group balance sheet

Holdings of shares in Allied Irish Banks, p.l.c., (by the parent or subsidiary companies), for any reason, are deducted in arriving at stockholders equity. At
December 31, 2005, shares in AIB with a value of 77 million (2004: 74 million) were held within the long-term business funds to meet the liabilities to policyholders.

Long-term assurance assets attributable to policyholders are presented in the Group balance sheet net of the carrying value of the shares in AIB held
within the fund. Group stockholders equity has been reduced by a similar amount.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|36. | DEPOSITS BY BANKS
|--- | -----------------



|                                                                       |  |                    |  |       
|---------------------------------------------------------------------- |  | ------------------ |  | ------
|                                                                       |  | December 31,      
|                                                                       |  | 2005               |  | 2004  
|                                                                       |  | (Euro in millions)
|Securities sold under agreements to repurchase                         |  | 11,038             |  | 8,523 
|Other borrowings from banks                                            |  | 18,291             |  | 11,905
|                                                                       |  |                    |  |       
|                                                                       |  | 29,329             |  | 20,428
|                                                                       |  |                    |  |       
|Of which:                                                              |  |                    |  |       
|Domestic offices                                                       |  | 27,401             |  | 18,450
|Foreign offices                                                        |  | 1,928              |  | 1,978 
|                                                                       |  |                    |  |       
|                                                                       |  | 29,329             |  | 20,428
|                                                                       |  |                    |  |       
|With agreed maturity dates or periods of notice,by remaining maturity: |  |                    |  |       
|Over 5 years                                                           |  | 53                 |  | 555   
|5 years or less but over 1 year                                        |  | 517                |  | 50    
|1 year or less but over 3 months                                       |  | 2,271              |  | 6,456 
|3 months or less but not repayable on demand                           |  | 25,843             |  | 13,014
|                                                                       |  |                    |  |       
|                                                                       |  | 28,684             |  | 20,075
|Repayable on demand                                                    |  | 645                |  | 353   
|                                                                       |  |                    |  |       
|                                                                       |  | 29,329             |  | 20,428
|                                                                       |  |                    |  |       
|Amounts include:                                                       |  |                    |  |       
|Due to associated undertakings                                         |  |                   |  | 2     
|                                                                       |  |                    |  |       

At December 31, 2005 930 million (2004: 920 million) of the deposits by credit
institutions comprise the banks obligations to the Central Bank and Financial Services Authority of Ireland (CBFSAI) under the terms of the Mortgage Backed Promisory Note (MBPN) programme. These obligations have been
secured by way of a first floating charge to the CBFSAI over all its right, title, interest and benefit, in 1,193 million (2004: 1,192 million) of loans and receivables to customers. Otherwise than with the prior written consent of the
CBFSAI, the bank has pledged under the terms of the floating charge to maintain the assets so charged free from any encumbrance and otherwise than in the ordinary course of business not to sell, transfer, lend or otherwise dispose of any part of the
charged assets.

Securities sold under agreements to repurchase are secured by Irish Government stock, US Treasury and US Government agency
securities and mature within three months.

The aggregate market value of all securities sold under agreements to repurchase did not exceed
10% of total assets and the amount at risk with any individual counterparty or group of related counterparties did not exceed 10% of total stockholders equity.

The carrying amount of financial assets pledged as security for liabilities amounted to 11,265 million.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|37. | CUSTOMER ACCOUNTS
|--- | -----------------



|                                                                      |  |                    |  |       
|--------------------------------------------------------------------- |  | ------------------ |  | ------
|                                                                      |  | December 31,      
|                                                                      |  | 2005               |  | 2004  
|                                                                      |  | (Euro in millions)
|Current accounts                                                      |  | 20,909             |  | 17,099
|Demand deposits                                                       |  | 8,013              |  | 7,321 
|Time deposits                                                         |  | 28,118             |  | 22,736
|                                                                      |  |                    |  |       
|                                                                      |  | 57,040             |  | 47,156
|                                                                      |  |                    |  |       
|Securities sold under agreements to repurchase                        |  | 6                  |  | 77    
|Other short-term borrowings                                           |  | 5,534              |  | 2,918 
|                                                                      |  |                    |  |       
|                                                                      |  | 5,540              |  | 2,995 
|                                                                      |  |                    |  |       
|                                                                      |  | 62,580             |  | 50,151
|                                                                      |  |                    |  |       
|Of which:                                                             |  |                    |  |       
|Non-interest bearing current accounts                                 |  |                    |  |       
|Domestic offices                                                      |  | 7,816              |  | 6,522 
|Foreign offices                                                       |  | 2,086              |  | 1,920 
|Interest bearing deposits, current accounts and short-term borrowings |  |                    |  |       
|Domestic offices                                                      |  | 32,977             |  | 25,425
|Foreign offices                                                       |  | 19,701             |  | 16,284
|                                                                      |  |                    |  |       
|                                                                      |  | 62,580             |  | 50,151
|                                                                      |  |                    |  |       
|Analyzed by remaining maturity:                                       |  |                    |  |       
|Over 5 years                                                          |  | 200                |  | 276   
|5 years or less but over 1 year                                       |  | 2,308              |  | 2,321 
|1 year or less but over 3 months                                      |  | 3,573              |  | 2,297 
|3 months or less but not repayable on demand                          |  | 28,130             |  | 20,812
|                                                                      |  |                    |  |       
|                                                                      |  | 34,211             |  | 25,706
|Repayable on demand                                                   |  | 28,369             |  | 24,445
|                                                                      |  |                    |  |       
|                                                                      |  | 62,580             |  | 50,151
|                                                                      |  |                    |  |       
|Amounts include:                                                      |  |                    |  |       
|Due to associated undertakings                                        |  | 38                 |  | 23    
|                                                                      |  |                    |  |       



|38. | TRADING PORTFOLIO FINANCIAL LIABILITIES
|--- | ---------------------------------------



|                            |  |                    |  |               
|--------------------------- |  | ------------------ |  | --------------
|                            |  | December 31,2005   |  | January 1,2005
|                            |  | (Euro in millions)
|Debt securities:            |  |                    |  |               
|Government securities       |  | 219                |  | 309           
|Corporate listed            |  | 2                  |  | 4             
|                            |  |                    |  |               
|                            |  | 221                |  | 313           
|Equity instruments - listed |  | 19                 |  | 19            
|                            |  |                    |  |               
|                            |  | 240                |  | 332           
|                            |  |                    |  |               

At December 31, 2005 and January 1, 2005 the debt securities within trading portfolio
financial liabilities had a residual maturity of less than one year.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|39. | DEBT SECURITIES IN ISSUE
|--- | ------------------------



|                                                       |  |                    |  |       
|------------------------------------------------------ |  | ------------------ |  | ------
|                                                       |  | December 31,      
|                                                       |  | 2005               |  | 2004  
|                                                       |  | (Euro in millions)
|Bonds and medium term notes:                           |  |                    |  |       
|European medium term note programme                    |  | 6,656              |  | 3,250 
|Other medium term notes                                |  | 209                |  | 288   
|                                                       |  |                    |  |       
|                                                       |  | 6,865              |  | 3,538 
|                                                       |  |                    |  |       
|Other debt securities in issue:                        |  |                    |  |       
|Commercial paper                                       |  | 718                |  | 1,187 
|Commercial certificates of deposit                     |  | 10,028             |  | 7,080 
|                                                       |  |                    |  |       
|                                                       |  | 10,746             |  | 8,267 
|                                                       |  |                    |  |       
|                                                       |  | 17,611             |  | 11,805
|                                                       |  |                    |  |       
|Maturity analysis                                      |  |                    |  |       
|Bonds and medium term notes, by remaining maturity:    |  |                    |  |       
|5 years or less but over 1 year                        |  | 6,792              |  | 3,423 
|1 year or less but over 3 months                       |  | 51                 |  | 115   
|3 months or less                                       |  | 22                 |  |      
|                                                       |  |                    |  |       
|                                                       |  | 6,865              |  | 3,538 
|                                                       |  |                    |  |       
|Other debt securities in issue, by remaining maturity: |  |                    |  |       
|5 years or less but over 1 year                        |  | 1,578              |  | 676   
|1 year or less but over 3 months                       |  | 3,402              |  | 2,016 
|3 months or less                                       |  | 5,766              |  | 5,575 
|                                                       |  |                    |  |       
|                                                       |  | 10,746             |  | 8,267 
|                                                       |  |                    |  |       
|                                                       |  | 17,611             |  | 11,805
|                                                       |  |                    |  |       



|40. | OTHER LIABILITIES
|--- | -----------------



|                                                                          |  |                    |  |              
|------------------------------------------------------------------------- |  | ------------------ |  | -------------
|                                                                          |  | December 312005    |  | January 12005
|                                                                          |  | (Euro in millions)
|Notes in circulation                                                      |  | 484                |  | 450          
|Provisions for future commitments in relation to the funding of Icarom(1) |  | 69                 |  | 78           
|Other                                                                     |  | 1,046              |  | 1,065        
|                                                                          |  |                    |  |              
|                                                                          |  | 1,599              |  | 1,593        
|                                                                          |  |                    |  |              



|(1) | The provision represents the present value of the cost of the future commitments arising under the 1992 agreement in relation to the funding of Icarom. A discount
rate of 3.21% was applied in the year ended December 31, 2005 (2004: 4.185%), in discounting the cost of the future commitments arising under this agreement. As at December 31, 2005 the undiscounted amount was 78 million (2004:
89 million). Of the 78 million, 11 million is due within 1 year and 45 million is payable between 1 and 5 years, with the remaining 22 million payable thereafter. The unwinding of the discount on the provision amounted
to  2 million (2004 3.4 million).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|41. | PROVISIONS FOR LIABILITIES AND COMMITMENTS
|--- | ------------------------------------------



|                                            |  |                           |   |  |                 |   |  |       |  
|------------------------------------------- |  | ------------------------- | - |  | --------------- | - |  | ----- | -
|                                            |  | Liabilitiesandcommitments |   |  | Otherprovisions |   |  | Total |  
|                                            |  | (Euro in millions)        |  
|At January 1, 2005                          |  | 47                        |   |  | 75              |   |  | 122   |  
|Currency translation adjustments            |  |                          |   |  | 1               |   |  | 1     |  
|Amounts charged to statement of income      |  | 28                        |   |  | 47              |   |  | 75    |  
|Amounts written back to statement of income |  | (8                        | ) |  | (15             | ) |  | (23   | )
|Provisions utilized                         |  | (17                       | ) |  | (18             | ) |  | (35   | )
|                                            |  |                           |   |  |                 |   |  |       |  
|At December 31, 2005                        |  | 50                        |   |  | 90              |   |  | 140   |  
|                                            |  |                           |   |  |                 |   |  |       |  



|42. | SUBORDINATED LIABILITIES AND OTHER CAPITAL INSTRUMENTS
|--- | ------------------------------------------------------



|                                                                             |  |                    |  |                |  |                 
|---------------------------------------------------------------------------- |  | ------------------ |  | -------------- |  | ----------------
|                                                                             |  | December 31,2005   |  | January 1,2005 |  | December 31,2004
|                                                                             |  | (Euro in millions)
|Allied Irish Banks, p.l.c.                                                   |  |                    |  |                |  |                 
|Undated capital notes                                                        |  | 868                |  | 346            |  | 346             
|Dated capital notes                                                          |  | 2,678              |  | 1,923          |  | 1,923           
|US$250 million non-cumulative preference shares                              |  | 210                |  | 182            |  |                
|Reserve capital instruments                                                  |  |                   |  |               |  | 497             
|                                                                             |  |                    |  |                |  |                 
|                                                                             |  | 3,756              |  | 2,451          |  | 2,766           
|                                                                             |  |                    |  |                |  |                 
|Undated capital notes                                                        |  |                    |  |                |  |                 
|US$100 million Floating Rate Notes, Undated                                  |  |                   |  | 74             |  | 74              
|US$100 million Floating Rate Primary Capital Perpetual Notes, Undated (a)    |  | 85                 |  | 73             |  | 73              
|200 million Fixed Rate Perpetual Subordinated Notes (b)                     |  | 199                |  | 199            |  | 199             
|Stg£400 million Perpetual Callable Step-Up Subordinated Notes (c)            |  | 584                |  |               |  |                
|                                                                             |  |                    |  |                |  |                 
|                                                                             |  | 868                |  | 346            |  | 346             
|                                                                             |  |                    |  |                |  |                 
|Dated capital notes                                                          |  |                    |  |                |  |                 
|Allied Irish Banks, p.l.c.                                                   |  |                    |  |                |  |                 
|European Medium Term Note Programme:                                         |  |                    |  |                |  |                 
|US$250 million Floating Rate Notes due January 2010                          |  |                   |  | 184            |  | 184             
|250 million Floating Rate Notes due January 2010                            |  |                   |  | 250            |  | 250             
|100 million Floating Rate Notes due August 2010                             |  |                   |  | 100            |  | 100             
|200 million Floating Rate Notes due June 2013 (d)                           |  | 200                |  | 200            |  | 200             
|US$400 million Floating Rate Notes due July 2015 (e)                         |  | 338                |  | 293            |  | 293             
|400 million Floating Rate Notes due March 2015 (f)                          |  | 400                |  | 400            |  | 400             
|500 million Callable Subordinated Step-Up Floating Rate Notes due 2017 (g)  |  | 499                |  |               |  |                
|Stg£500 million Callable Subordinated Fixed/Floating Rate Notes due 2025 (h) |  | 730                |  |               |  |                
|Stg£350 million Fixed Rate Notes due November 2030 (i)                       |  | 511                |  | 496            |  | 496             
|                                                                             |  |                    |  |                |  |                 
|                                                                             |  | 2,678              |  | 1,923          |  | 1,923           
|                                                                             |  |                    |  |                |  |                 
|The dated loan capital outstanding is repayable as follows:                  |  |                    |  |                |  |                 
|In one year or less                                                          |  |                   |  | 434            |  | 434             
|Between 1 and 2 years                                                        |  |                   |  |               |  |                
|Between 2 and 5 years                                                        |  |                   |  |               |  |                
|In 5 years or more                                                           |  | 2,678              |  | 1,489          |  | 1,489           
|                                                                             |  |                    |  |                |  |                 
|                                                                             |  | 2,678              |  | 1,923          |  | 1,923           
|                                                                             |  |                    |  |                |  |                 

The loan capital of the Bank is unsecured and is subordinated in right of payment to the ordinary
creditors, including depositors, of the Bank.



142



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Undated capital notes

The US$ 100 million Floating Rate Notes, Undated were redeemed on November 30, 2005. The US$ 100 million Floating Rate Primary Capital Perpetual Notes have no final maturity but may be redeemed at par at the option of the
Bank, with the prior approval of the Financial Regulator. Interest is payable quarterly on the US$ 100 million Floating Rate Primary Capital Perpetual Notes. The 200 million Fixed Rate Perpetual Subordinated Notes, with interest payable
annually, have no final maturity but may be redeemed at the option of the Bank, with the prior approval of the Financial Regulator, on each coupon payment date on or after August 3, 2009. The Stg £400 million Perpetual Callable Step-Up
Subordinated Notes with interest payable annually up to September 1, 2015, and with interest payable quarterly thereafter, have no final maturity but may be redeemed at the option of the Bank, with the prior approval of the Financial Regulator,
on September 1, 2015 and every interest payment date thereafter.

Dated capital notes

The European Medium Term Note Programme is subordinated in right of payment to the ordinary creditors, including depositors, of the Bank. The US$ 250 million
Floating Rate Notes were redeemed on January 24, 2005, the 250 million Floating Rate Notes were redeemed on January 25, 2005 and the 100 million Floating Rate Notes were redeemed on August 2, 2005. The 200
million Floating Rate Notes, with interest payable quarterly, may be redeemed, in whole but not in part, on June 12, 2008 and on each interest payment date thereafter. The US$ 400 million Floating Rate Notes, with interest payable
quarterly, may be redeemed, in whole but not in part, on any interest payment date falling in or after July 2010. The 400 million Floating Rate Notes with interest payable quarterly, may be redeemed, in whole but not in part, on any interest
payment date falling in or after March 2010. The 500 million Callable Subordinated Step-Up Floating Rate Notes with interest payable quarterly may be redeemed in whole but not in part on any interest payment date falling in or after
October 24, 2017. The Stg£ 500 million Subordinated Callable Fixed/Floating Rate Notes, with interest payable annually, up to March 10, 2020 and with interest payable quarterly from June 10, 2020 thereafter may be redeemed,
in whole but not in part on any interest payment date falling in or after March 10, 2025. The Stg £ 350 million Fixed Rate Notes, with interest payable annually in arrears on November 26 in each year, may be redeemed, in whole
but not in part, on November 26, 2025 and on each interest payment date thereafter. In all cases, redemption prior to maturity is subject to the necessary prior approval of the Financial Regulator. There is no exchange exposure as the proceeds
of these notes are retained in their respective currencies.

US$ 250m non-cumulative preference shares

In 1998, 250,000 non-cumulative preference shares of US$ 25 each were issued at a price of US$ 995.16 per share raising US$ 248.8 million before expenses. The
holders of the non-cumulative preference shares are entitled to a non-cumulative preferential dividend, payable quarterly in arrears, at a floating rate equal to 3 month dollar LIBOR plus 0.875% on the liquidation preference amount of US$
1,000 per share. The preference shares are redeemable at the option of the Bank, and with the agreement of the Financial Regulator, on or after July 15, 2008 (i) in whole or in part or (ii) prior to that date in certain
circumstances in whole, but not in part. In each case, the preference shares will be redeemed at a price equal to US$ 1,000 per share (consisting of a redemption price of US$ 995.16 plus a special dividend of US$ 4.84 per share), plus
accrued dividends.

Prior to transition to IFRS, at January 1, 2005, the US$ 250 million non-cumulative preference shares were
included in stockholders equity, however, because of the terms within this instrument they have been reclassed to subordinated liabilities under IFRS.

Reserve capital instruments (RCIs)

On transition to IFRS at January 1, 2005, the Reserve capital instruments were reclassified to
equity and are included in other equity interests (note 44).

The interest rates applicable on the undated and
dated capital notes are as follows:



|(a) | Libor plus 50 basis points.
|--- | ---------------------------



|(b) | 3 month Euribor plus 225 basis points.
|--- | --------------------------------------



|(c) | 5.25% fixed until September 1, 2015; 3 month Sterling Libor plus 155 basis points thereafter.
|--- | ---------------------------------------------------------------------------------------------



|(d) | 3 month Euribor plus 60 basis points until June 12, 2008; Euribor plus 110 basis points thereafter.
|--- | ---------------------------------------------------------------------------------------------------



|(e) | 3 month US$ Libor plus 30 basis points until July 30, 2010; 3 month US$ Libor plus 80 basis points thereafter.
|--- | --------------------------------------------------------------------------------------------------------------



|(f) | 3 month Euribor plus 30 basis points until March 20, 2010; 3 month Euribor plus 80 basis points thereafter.
|--- | -----------------------------------------------------------------------------------------------------------



|(g) | 3 month Euribor plus 25 basis points until November 2012; 3 month Euribor plus 75 basis points thereafter.
|--- | ----------------------------------------------------------------------------------------------------------



|(h) | 5.25% fixed until March 10, 2010; Sterling Libor plus 128 basis points thereafter.
|--- | ----------------------------------------------------------------------------------



|(i) | 5.625% fixed, reset to 3 month sterling Libor plus 145 basis points if not called on the first call date - November 26, 2025.
|--- | -----------------------------------------------------------------------------------------------------------------------------



143



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|43. | MINORITY INTERESTS IN SUBSIDIARIES
|--- | ----------------------------------



|                                    |  |                    |  |      
|----------------------------------- |  | ------------------ |  | -----
|                                    |  | December 31,      
|                                    |  | 2005               |  | 2004 
|                                    |  | (Euro in millions)
|Equity interest in subsidiaries     |  | 258                |  | 221  
|Non-equity interest in subsidiaries |  | 990                |  | 990  
|                                    |  |                    |  |      
|                                    |  | 1,248              |  | 1,211
|                                    |  |                    |  |      

Non-equity interest in subsidiaries

In December 2004, Fixed Rate/Floating Rate Guaranteed Non-voting Non-cumulative Perpetual Preferred Securities (Preferred Securities) in the amount of 1,000,000,000 were issued through a Limited
Partnership. The Preferred Securities were issued at par and have the benefit of a subordinated guarantee of Allied Irish Banks, p.l.c. (AIB).The Preferred Securities have no fixed final redemption date and the holders have no rights to
call for the redemption of the Preferred Securities.

The Preferred Securities are redeemable in whole but not in part at the option of the
general partner and with the agreement of the IFSRA (i) upon the occurrence of certain events, or (ii) on or after December 17, 2014, subject to the provisions of the Limited Partnership Act, 1907.

Distributions on the Preferred Securities are non-cumulative. The distributions will be payable at a rate of 4.781% per annum up to
December 17, 2014 and thereafter at the rate of 1.10% per annum above 3 month EURIBOR, reset quarterly. The discretion of the Board of Directors of AIB to resolve that a distribution should not be paid is unfettered.

In the event of the dissolution of the Limited Partnership, holders of Preferred Securities will be entitled to receive a liquidation preference in an
amount equal to the distributions that those holders would have received in a dissolution of AIB at that time, if they had held, instead of the Preferred Securities, non-cumulative preference shares issued directly by AIB, having the same
liquidation preference as the Preferred Securities, and ranking junior to all liabilities of AIB including subordinated liabilities.



|44. | OTHER EQUITY INTERESTS
|--- | ----------------------

In February 2001, Reserve
Capital Instruments (RCIs) of 500 million were issued by Allied Irish Banks, p.l.c. at an issue price of 100. 069%. The RCIs are perpetual securities and have no maturity date. The RCIs are redeemable, in whole but not in part, at the option
of the Bank and with the agreement of the Financial Regulator, (i) upon the occurrence of certain events, or (ii) on or after February 28, 2011, an authorized officer having reported to the Trustees within the previous six months that
a solvency condition is met.

The RCIs bear interest at a rate of 7.50% per annum from (and including) February 5, 2001 to (but
excluding) February 28, 2011 and thereafter at 3.33% per annum above three month EURIBOR, reset quarterly.

The rights and claims
of the RCI holders and the coupon holders are subordinated to the claims of the senior creditors and the senior subordinated creditors of the issuer. In the event of a winding up of the issuer, the RCI holders will rank pari passuwith the
holders of the classes of preference shares (if any) from time to time issued by the issuer and in priority to all other stockholders.



144



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|45. | SHARE CAPITAL
|--- | -------------



|                                                 |  |                                        |  |        
|------------------------------------------------ |  | -------------------------------------- |  | -------
|                                                 |  | December 31,                          
|                                                 |  | 2005                                   |  | 2004   
|                                                 |  | (Euro in millions exceptshare amounts)
|Ordinary shares of 0.32 each                    |  |                                        |  |        
|Number of shares authorized (millions)           |  | 1,160.0                                |  | 1,160.0
|                                                 |  |                                        |  |        
|Number of shares issued (millions)               |  | 918.4                                  |  | 918.4  
|                                                 |  |                                        |  |        
|Issued and fully paid                            |  | 294                                    |  | 294    
|                                                 |  |                                        |  |        
|Non-cumulative preference shares of 1.27 each   |  |                                        |  |        
|Number of shares authorized (millions)           |  | 200.0                                  |  | 200.0  
|                                                 |  |                                        |  |        
|Number of shares issued (millions)               |  |                                       |  |       
|                                                 |  |                                        |  |        
|Non-cumulative preference shares of US$25 each   |  |                                        |  |        
|Number of shares authorized (millions)           |  | 20.0                                   |  | 20.0   
|                                                 |  |                                        |  |        
|Number of shares issued (millions)               |  | 0.25                                   |  | 0.25   
|                                                 |  |                                        |  |        
|Issued and fully paid                            |  | 5                                      |  | 5      
|                                                 |  |                                        |  |        
|Non-cumulative preference shares of Stg£1 each   |  |                                        |  |        
|Number of shares authorized (millions)           |  | 200.0                                  |  | 200.0  
|                                                 |  |                                        |  |        
|Number of shares issued (millions)               |  |                                       |  |       
|                                                 |  |                                        |  |        
|Non-cumulative preference shares of Yen 175 each |  |                                        |  |        
|Number of shares authorized (millions)           |  | 200.0                                  |  | 200.0  
|                                                 |  |                                        |  |        
|Number of shares issued (millions)               |  |                                       |  |       
|                                                 |  |                                        |  |        

During the year ended December 31, 2004, the number of ordinary shares in issue was increased from
907,621,316 to 918,435,570, through the allotment of 10,814,254 shares under the Companys dividend reinvestment plan, as follows:

(a) 6,443,950 shares were allotted to shareholders, at 12.20 per share, in respect of the final dividend for the year ended December 31, 2003; and

(b) 4,370,304 shares were allotted to shareholders, at 12.77 per share, in respect of the interim dividend for the year ended December 31, 2004.

These allotments were made in lieu of dividends amounting to 134.4 million.



145



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|46. | OWN SHARES
|--- | ----------

Share Repurchases

At the 2005 Annual General Meeting, stockholders granted authority to the Company, or any subsidiary, to make market purchases of up to 90 million
ordinary shares of the Company, subject to the terms and conditions set out in the relevant resolution. During the year ended December 31, 2005, ordinary shares previously purchased under a similar authority, and held as Treasury shares, were
re-issued as follows:



|                                           |  |                          |  |  |  |           
|------------------------------------------ |  | ------------------------ |  |  |  | ----------
|                                           |  | Years ended December 31,
|                                           |  | 2005                     |  |  |  | 2004      
|Treasury shares held, January 1            |  | 48,889,789               |  |  |  | 55,534,156
|Shares re-issued under:                    |  |                          |  |  |  |           
|AIB Share Option Plans                     |  | 3,487,950                |  |  |  | 4,338,350 
|Allfirst Financial Inc. Stock Option Plan  |  | 26,400                   |  |  |  | 29,600    
|AIB Approved Employee Profit Sharing Plans |  | 1,835,842                |  |  |  | 2,276,417 
|                                           |  | 5,350,192                |  |  |  | 6,644,367 
|                                           |  |                          |  |  |  |           
|Treasury shares held, December 31          |  | 43,539,597               |  |  |  | 48,889,789
|                                           |  |                          |  |  |  |           

In addition, 5.6 million ordinary shares were purchased by a subsidiary undertaking in 1997
at a cost of 42 million, on which the related dividend entitlements have been waived.

The cost of share repurchases less proceeds of
shares reissued has been charged to the profit and loss account reserve. The shares issued during 2005 to participants in the AIB share option plans were issued at prices of  10.02, 11.90 and

| | 12.20 per share. The total consideration received for these shares was  36.8 million.
|- | --------------------------------------------------------------------------------------

The consideration received for the shares issued during 2005 on the exercise of Dauphin converted options to participants in the Allfirst Financial Inc.
Stock Option Plan was  0.2 million.

During 2005, the Company re-issued from its pool of Treasury Shares 1,835,842 ordinary
shares to the Trustees of the employees profit sharing plans, at  15.78 per share. The consideration received for these shares was  29 million.

Employee Share Plans

These plans are detailed in Item 6 - Directors, Senior Management and
employees - Share Ownership on page 48 of this Report.

Allfirst Financial Inc. stock option plan

Under the terms of the Agreement and Plan of Merger between the Company, First Maryland Bancorp (subsequently renamed Allfirst) and Dauphin
Deposit Corporation (Dauphin, subsequently renamed Allfirst), approved by shareholders at the 1997 Annual General Meeting, options to purchase Dauphin shares which were outstanding immediately prior to the merger were
converted, at the holders elections, into either cash or options to purchase a similar number of AIB American Depositary Shares (converted options). On April 1, 2003, the merger of Allfirst Financial Inc.
(Allfirst) with M&T Bank Corporation (M&T) was completed, pursuant to the Agreement and Plan of Reorganisation dated September 26, 2002 by and among the Company,Allfirst and M&T. Under the terms of that
Agreement, converted options outstanding immediately prior to that merger (over some 321,598 ordinary shares) remained in force.

At
December 31, 2005, converted options were outstanding over 80,598 ordinary shares.



146



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Employee share plans and trusts

The Group sponsors a number of employee share plans whereby purchases of shares are made in the open market to satisfy commitments under the plans.

At December 31, 2005, 2.2 million shares (2004: 2.5 million) were held by trustees with a book value of 26.0 million (2004: 25.5
million), and a market value of 39.9 million (2004: 38.5 million). The book value is deducted from the profit and loss account reserve while the shares continue to be held by the Group.

The Group sponsors SAYE plans for eligible employees in the UK, the Isle of Man and Channel Islands. The trustees of the schemes have borrowed funds from
Group companies, interest free, to enable them to purchase Allied Irish Banks, p.l.c. ordinary shares in the open market. These shares are used to satisfy commitments arising under the plans. The trustees receive dividends on the shares which are
used to meet the expenses. The cost of providing these shares is charged to the statement of income on a systematic basis over the period that the employees are expected to benefit. At December 31, 2005, 1.4 million shares (2004: 1.0
million) were held by the trustees with a book value of 17.9 million (2004: 10.5 million) and a market value of 25.1 million (2004: 15.2 million).

In 2001, the AIB Group Employee Share Trust was established to satisfy commitments arising under the AIB Group Long-Term Incentive Plan (LTIP). Funds are provided to the trustees to enable them to purchase Allied
Irish Banks, p.l.c. ordinary shares in the open market. The trustees have waived their entitlement to dividends. At December 31, 2005, 0.2 million shares (2004: 0.2 million) were held by the trustees with a book value of 1.3 million
(2004: 1.3 million) and a market value of 3.6 million (2004: 3.1 million).

Prior to its disposal to M&T Bank
Corporation, Allfirst Financial, Inc. sponsored the Allfirst Stock Option Plans, for the benefit of key employees of Allfirst. At December 31, 2002 Allfirst had lent US$ 178 million to a trust to enable it to purchase Allied Irish Banks,
p.l.c. ordinary shares in the form of American Depositary Shares in the open market. The shares purchased are used to satisfy options which have been granted to Allfirst employees. Proceeds of option exercises are used to repay the loan to the
trust. Under the terms of the trust, the trustees receive dividends on the shares which are used to meet the expenses of the trust. A similar scheme operated for certain eligible employees of AIBs US operations. At December 31, 2005,
0.6 million (2004: 1.4 million) ordinary shares were held by the trust with a cost of 6.7 million (2004: 13.3 million) and a market value of 11.1 million (2004: 20.1 million).

Subsidiary companies

Certain subsidiary companies
hold shares in AIB for customer facilitation and in the normal course of business. At December 31, 2005, 4.5 million shares (2004: 4.8 million) with a book and market value of 81.6 million (2004: 73.7 million) were held by
subsidiary companies.

At December 31, 2005, the accounting treatment of own shares gave rise to a deduction against
Stockholders Equity - Profit and Loss account in the amount of 108 million (2004: 99 million).

The accounting treatment
is not intended to affect the legal characterisation of the transaction or to change the situation at law achieved by the parties to it. Thus, the inclusion of the shares as a deduction against stockholders equity on the Group balance sheet
does not imply that they have been purchased by the company as a matter of law.



|47. | ANALYSIS OF CASH AND CASH EQUIVALENTS
|--- | -------------------------------------

For the
purpose of the statement of cash flows, cash and cash equivalents comprise the following balances with less than 3 months maturity from the date of acquisition:



|                                   |  |                          |  |      
|---------------------------------- |  | ------------------------ |  | -----
|                                   |  | Years ended December 31,
|                                   |  | 2005                     |  | 2004 
|                                   |  | (Euro in millions)      
|Cash and balances at central banks |  | 742                      |  | 887  
|Loans and receivables to banks     |  | 6,598                    |  | 1,886
|Short term investments             |  | 330                      |  |     
|                                   |  |                          |  |      
|At December 31                     |  | 7,670                    |  | 2,773
|                                   |  |                          |  |      

The Group is required to maintain balances with the Central Bank and Financial Services Authority
of Ireland which amounted to 2,694 million (2004: 446 million). The Group is also required by law to maintain reserve balances with the Bank of England and with the National Bank of Poland. At December 2005, such reserve balances
amounted to 505 million (2004: 621 million).



147



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|48. | MEMORANDUM ITEMS: CONTINGENT LIABILITIES AND COMMITMENTS
|--- | --------------------------------------------------------

In the normal course of business, the Group is a party to financial instruments with off-balance sheet risk to meet the financing needs of customers.

These instruments involve, to varying degrees, elements of credit risk which are not reflected in the consolidated balance sheet. Credit risk is defined as the possibility of sustaining a loss because the other party
to a financial instrument fails to perform in accordance with the terms of the contract.

The Groups maximum exposure to credit loss
under contingent liabilities and commitments to extend credit, in the event of non-performance by the other party where all counterclaims, collateral or security prove valueless, is represented by the contractual amounts of those instruments.

The risk weighted amount is obtained by applying credit conversion factors and counterparty risk weightings in accordance with the IFSRA
guidelines implementing the EC Own Funds and Solvency Ratio Directives.

The Group uses the same credit control and risk management
policies in undertaking off-balance sheet commitments as it does for on balance sheet lending.

The following table gives for the Group the
nominal or contract amounts and the risk weighted credit equivalent of contingent liabilities and commitments.



|                                                                               |  |                    |  |  |  |                    |  |  |  |                |  |  |  |                   
|------------------------------------------------------------------------------ |  | ------------------ |  |  |  | ------------------ |  |  |  | -------------- |  |  |  | ------------------
|                                                                               |  | December 31, 2005  |  |  |  | December 31, 2004 
|                                                                               |  | Contractamount     |  |  |  | Riskweightedamount |  |  |  | Contractamount |  |  |  | Riskweightedamount
|                                                                               |  | (Euro in millions)
|Contingent liabilities                                                         |  |                    |  |  |  |                    |  |  |  |                |  |  |  |                   
|Acceptances(1)                                                                 |  |                   |  |  |  |                   |  |  |  | 12             |  |  |  | 12                
|Endorsements                                                                   |  |                   |  |  |  |                   |  |  |  | 2              |  |  |  | 2                 
|Guarantees and assets pledged as collateral security:                          |  |                    |  |  |  |                    |  |  |  |                |  |  |  |                   
|Guarantees and irrevocable letters of credit                                   |  | 7,157              |  |  |  | 7,142              |  |  |  | 5,394          |  |  |  | 5,287             
|Other contingent liabilities                                                   |  | 1,396              |  |  |  | 982                |  |  |  | 830            |  |  |  | 420               
|                                                                               |  | 8,553              |  |  |  | 8,124              |  |  |  | 6,238          |  |  |  | 5,721             
|Commitments                                                                    |  |                    |  |  |  |                    |  |  |  |                |  |  |  |                   
|Documentary credits and short-term trade-related transactions                  |  | 297                |  |  |  | 111                |  |  |  | 267            |  |  |  | 103               
|Forward asset purchases and forward deposits placed                            |  |                   |  |  |  |                   |  |  |  | 88             |  |  |  | 18                
|Undrawn note issuance and revolving underwriting facilities                    |  | 173                |  |  |  | 86                 |  |  |  | 108            |  |  |  | 54                
|Undrawn formal standby facilities, credit lines and other commitments to lend: |  |                    |  |  |  |                    |  |  |  |                |  |  |  |                   
|Less than 1 year(2)                                                            |  | 6,579              |  |  |  |                   |  |  |  | 5,665          |  |  |  |                  
|1 year and over                                                                |  | 12,509             |  |  |  | 6,223              |  |  |  | 9,999          |  |  |  | 4,944             
|                                                                               |  | 19,558             |  |  |  | 6,420              |  |  |  | 16,127         |  |  |  | 5,119             
|                                                                               |  |                    |  |  |  |                    |  |  |  |                |  |  |  |                   
|                                                                               |  | 28,111             |  |  |  | 14,544             |  |  |  | 22,365         |  |  |  | 10,840            
|                                                                               |  |                    |  |  |  |                    |  |  |  |                |  |  |  |                   

---

|(1) | On transition to IFRS, at January 1, 2005, IAS 39 required the recognition of a liability for acceptances from the date of acceptance. A corresponding asset due
from the originator is also recognized. Under Irish GAAP, acceptances were accounted for on a net basis and shown as a contingent liability.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Undrawn loan commitments which are unconditionally cancellable at any time or which have a maturity of less than one year have a risk weighting of zero.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



148



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                          |  |                       |  |                    |  |                       |  |            
|------------------------- |  | --------------------- |  | ------------------ |  | --------------------- |  | -----------
|                          |  | December 31, 2005     |  | December 31, 2004 
|                          |  | Contingentliabilities |  | Commitments        |  | Contingentliabilities |  | Commitments
|                          |  |                       |  | (Euro in millions) |  |                      
|Concentration of exposure |  |                       |  |                    |  |                       |  |            
|Republic of Ireland       |  | 3,860                 |  | 9,165              |  | 2,580                 |  | 7,945      
|United States of America  |  | 3,366                 |  | 3,007              |  | 2,614                 |  | 1,820      
|United Kingdom            |  | 1,287                 |  | 6,069              |  | 1,004                 |  | 4,970      
|Poland                    |  | 40                    |  | 1,237              |  | 40                    |  | 1,392      
|Rest of the world         |  |                      |  | 80                 |  |                      |  |           
|                          |  |                       |  |                    |  |                       |  |            
|                          |  | 8,553                 |  | 19,558             |  | 6,238                 |  | 16,127     
|                          |  |                       |  |                    |  |                       |  |            

There exists a contingent liability to repay in whole or in part grants received on equipment
leased to customers if certain events set out in the agreements occur.

Following the foreign exchange pricing issue in 2004, Allied Irish
Banks, p.l.c. agreed a management action plan with the Financial Regulator which included:- the introduction of a speak up policy as an additional channel to help staff raise concerns; the improvement and simplification of product delivery
processes; and the strengthening of enterprise-wide quality assurance, risk and compliance functions. This program is well advanced but not complete. When issues have come to light, the Financial Regulator has been briefed and appropriate remedial
action initiated. AIB has estimated the likely financial effect of such issues and this has been provided for at December 31, 2005.

Except as set out below, AIB Group is not, nor has been, involved in, nor are there, so far as the Company is aware, pending or threatened by or against AIB Group any legal or arbitration proceedings which may have, or have had during the
previous twelve months, a significant effect on the financial position of AIB Group.

Class action and purported stockholder derivative action

On March 5, 2002 and on April 24, 2002, separate class action lawsuits under the Securities Exchange Act, 1934 of the United
States were filed in the United States District Court for the Southern District of New York against AIB, Allfirst and certain serving and past officers and directors of Allfirst and its subsidiaries, seeking compensatory damages, legal fees and
other costs and expenses relating to alleged misrepresentations in filings of AIB and Allfirst. On May 3, 2002, a motion to consolidate both cases and to appoint a lead plaintiff was filed with the Court. On December 7, 2004 the Court
granted this motion. In accordance with the direction of the Court, the plaintiffs filed an amended and consolidated complaint on February 7, 2005. Certain of the defendants (including AIB and Allfirst) filed a motion to dismiss the
consolidated amended complaint on April 8, 2005. In December 2005 a settlement was reached, under which all claims are to be dismissed without any admission of liability or wrongdoing by any defendant. The class of security holders will receive
a cash payment of US$ 2.5 million, out of which the Court will be asked to award Attorneys fees to class counsel. The settlement must be approved by the Court.

On May 13, 2002, a purported shareholder derivative action was filed in the Circuit Court for Baltimore City, Maryland. A holder of AIB American Depositary Shares purported to sue certain present and former
directors and officers of Allfirst Bank on behalf of AIB, alleging those persons were liable for the foreign exchange trading losses. No relief was sought in the purported derivative action against AIB, Allfirst or Allfirst Bank. On
December 30, 2002, the Court dismissed the action. On January 10, 2003, the plaintiffs filed a motion seeking to have the Court amend or revise the judgement, or to be granted leave to file an amended complaint. This was dismissed on
March 3, 2003. The plaintiffs filed a second such motion on March 17, 2003. The Court dismissed this on April 4, 2003. On June 20, 2003, the plaintiffs petition to bypass the Maryland Court of Special Appeals and appeal
directly to the Maryland Court of Appeals was denied by the Maryland Court of Appeals. The plaintiffs appeal to the Maryland Court of Special Appeals was argued on January 12, 2004. On December 3, 2004 the Maryland Court of Special
Appeals affirmed the dismissal of the action. On January 21, 2005, the plaintiff petitioned the Maryland Court of Appeals to hear an appeal from this decision. Oral argument on this appeal was heard on September 1, 2005 and judgment
delivered on December 13, 2005. By a vote of six to one, the Court upheld the judgment of the Court of Special Appeals affirming the dismissal of the action. On January 11, 2006 the Attorneys for the Plaintiff filed a motion asking the
Court of Appeals to reconsider its decision.

Certain of the individual defendants in these actions have asserted or may possibly assert
claims for indemnification against AIB and/or Allfirst, which, if made against Allfirst following completion of the M&T transaction, might be subject to the indemnification obligations of AIB as part of the agreement with M&T. In the nature
of any such claims, it is not possible to quantify the amount which might be asserted in any such claim. On the basis of current information, the Board of Directors of AIB do not believe that any of the above proceedings are likely to have (either
individually or in the aggregate) a significant effect on the financial position of AIB and its subsidiaries taken as a whole.

There are
no other material legal proceedings pending or, as far as AIB is aware, threatened against AIB Group.



149



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|49. | DERIVATIVE FINANCIAL INSTRUMENTS
|--- | --------------------------------

The objectives,
policies and strategies in managing the risks that arise in connection with the use of financial instruments, including derivative financial instruments, are set out in the Financial review.

Derivatives are used to service customer requirements, to manage the Groups interest rate, exchange rate and equity exposures and for trading
purposes. Derivative instruments are contractual agreements whose value is derived from price movements in underlying assets, interest rates, foreign exchange rates or indices. The majority of the Groups derivative activities are undertaken at
the parent company level and the discussion below applies equally to the parent company and Group.

These instruments involve, to varying
degrees, elements of market risk and credit risk which are not reflected in the consolidated balance sheet. Market risk is the exposure to potential loss through holding interest rate, exchange rate and equity positions in the face of absolute and
relative price movements, interest rate volatility, movements in exchange rates and shifts in liquidity. Credit risk is the exposure to loss should the counterparty to a financial instrument fail to perform in accordance with the terms of the
contract.

While notional principal amounts are used to express the volume of derivative transactions, the amounts subject to credit risk
are much lower because derivative contracts typically involve payments based on the net differences between specified prices or rates. Credit risk arises to the extent that the default of a counterparty to the derivative transaction exposes the
Group to the need to replace existing contracts at prices that are less favourable than when the contract was entered into. The potential loss to the Group is known as the gross replacement cost. For risk management purposes, consideration is taken
of the fact that not all counterparties to derivative positions are expected to default at the point where the Group is most exposed to them.

Credit risk in derivatives contracts is the risk that the Groups counterparty in the contract defaults prior to maturity at a time when the Group has a claim on the counterparty under the contract. The Group would then have to replace
the contract at the current market rate, which may result in a loss.

The following tables present the notional principal amount and the
gross replacement cost of interest rate, exchange rate and equity contracts at December 31, 2005 and 2004.



|                           |  |                         |  |                      |  |                         |  |                     
|-------------------------- |  | ----------------------- |  | -------------------- |  | ----------------------- |  | --------------------
|                           |  | December 31, 2005       |  | December 31, 2004   
|                           |  | Notionalprincipalamount |  | Grossreplacementcost |  | Notionalprincipalamount |  | Grossreplacementcost
|                           |  | (Euro in millions)     
|Interest rate contracts(1) |  |                         |  |                      |  |                         |  |                     
|Trading                    |  | 126,885                 |  | 685                  |  | 109,372                 |  | 765                 
|Non-trading                |  | 51,441                  |  | 461                  |  | 31,695                  |  | 294                 
|                           |  |                         |  |                      |  |                         |  |                     
|                           |  | 178,326                 |  | 1,146                |  | 141,067                 |  | 1,059               
|                           |  |                         |  |                      |  |                         |  |                     
|Exchange rate contracts(1) |  |                         |  |                      |  |                         |  |                     
|Trading                    |  | 19,799                  |  | 238                  |  | 15,870                  |  | 599                 
|Non-trading                |  |                        |  |                     |  |                        |  |                    
|                           |  |                         |  |                      |  |                         |  |                     
|                           |  | 19,799                  |  | 238                  |  | 15,870                  |  | 599                 
|                           |  |                         |  |                      |  |                         |  |                     
|Equity contracts(1)        |  |                         |  |                      |  |                         |  |                     
|Trading                    |  | 4,386                   |  | 253                  |  | 3,575                   |  | 112                 
|Non-trading                |  |                        |  |                     |  |                        |  |                    
|                           |  |                         |  |                      |  |                         |  |                     
|                           |  | 4,386                   |  | 253                  |  | 3,575                   |  | 112                 
|                           |  |                         |  |                      |  |                         |  |                     

---

|(1) | Interest rate contracts are entered into for both trading and hedging purposes. Equity and exchange rate contracts are entered into for trading purposes only.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

The Group uses the same credit control and risk management policies in undertaking all off-balance sheet commitments as it
does for on balance sheet lending including counterparty credit approval, limit setting and monitoring procedures. In addition, in relation to derivative instruments, the Groups exposure to market risk is controlled within the risk limits in
the Groups Interest Rate Risk and Foreign Exchange Risk Policies and is further constrained by the risk parameters incorporated in the Groups Derivatives Policy as approved by the Board.



150



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following table analyzes the notional amount and gross replacement cost of interest rate,
exchange rate and equity contracts by maturity.



|                       |                    |                   |             |        |           |        |       |        
|---------------------- | ------------------ | ----------------- | ----------- | ------ | --------- | ------ | ----- | -------
|                       |                    | Residual maturity
|                       | < 1 year           |                   | 1 < 5 years |        | 5 years + |        | Total
|                       | (Euro in millions)
|2005                   |                    |                   |             |        |           |        |       |        
|Notional amount        |                    | 131,780           |             | 54,060 |           | 16,671 |       | 202,511
|Gross replacement cost |                    | 557               |             | 645    |           | 435    |       | 1,637  
|2004                   |                    |                   |             |        |           |        |       |        
|Notional amount        |                    | 100,303           |             | 46,330 |           | 13,879 |       | 160,512
|Gross replacement cost |                    | 758               |             | 655    |           | 357    |       | 1,770  

AIB Group has the following concentration of exposures in respect of notional amount and gross
replacement cost of all interest rate, exchange rate and equity contracts. The concentrations are based primarily on the location of the office recording the transaction.



|                         |                    |                   |                      |                   |                |         |                      |      
|------------------------ | ------------------ | ----------------- | -------------------- | ----------------- | -------------- | ------- | -------------------- | -----
|                         |                    | December 31, 2005 |                      | December 31, 2004
|                         | Notionalamount     |                   | Grossreplacementcost |                   | Notionalamount |         | Grossreplacementcost
|                         | (Euro in millions)
|Republic of Ireland      |                    | 161,589           |                      | 1,318             |                | 121,896 |                      | 1,316
|Unites States of America |                    | 4,134             |                      | 40                |                | 3,268   |                      | 43   
|United Kingdom           |                    | 18,449            |                      | 184               |                | 26,798  |                      | 219  
|Poland                   |                    | 18,339            |                      | 95                |                | 8,550   |                      | 192  
|                         |                    |                   |                      |                   |                |         |                      |      
|                         |                    | 202,511           |                      | 1,637             |                | 160,512 |                      | 1,770
|                         |                    |                   |                      |                   |                |         |                      |      

Trading activities

AIB Group maintains trading positions in a variety of financial instruments including derivatives. These financial instruments include interest rate, foreign exchange and equity futures, interest rate swaps, interest
rate caps and floors, forward rate agreements, and interest rate, foreign exchange and equity index options. Most of these positions arise 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 managers and traders involved in financial derivatives have the technical expertise to trade these products and the active involvement of the
traders in these markets allows the Group to offer competitive pricing to customers.

All trading activity is conducted within risk limits
approved by the Board. Systems are in place which measure risks and profitability associated with derivative trading positions as market movements occur. Independent risk control units monitor these risks.

The Groups credit exposure at 31 December 2005 and 2004 from derivatives held for trading purposes is represented by the fair value of
instruments with a positive fair value (assets in the table on page 152). The risk that counterparties to derivative contracts might default on their obligations is monitored on an ongoing basis and the level of credit risk is minimised by dealing
with counterparties of good credit standing. All trading instruments are subject to market risk. As the traded instruments are recognised at market value, these changes directly affect reported income for the period. Exposure to market risk is
managed in accordance with risk limits approved by the Board through buying or selling instruments or entering into offsetting positions.

The Group undertakes trading activities in interest rate contracts with the Group being a party to interest rate swap, forward, futures, option, cap and floor contracts. The Groups largest activity is in interest rate swaps. The two
parties to an interest rate swap agree to exchange, at agreed intervals, payment streams calculated on a specified notional principal amount. Forward rate agreements are also used by the Group in its trading activities. Forward rate agreements
settle in cash at a specified future date based on the difference between agreed market rates applied to a notional principal amount. Most of these contracts have maturity terms up to one year.



151



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following table shows the notional principal amounts of derivative financial instruments, analyzed by product and
purpose as at December 31, 2005 and the fair values of derivative financial instruments, analyzed by product and purpose, as at December 31 and January 1, 2005.



|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|-------------------------------------------------- | -------------- | ----------------- | ------ |  | ------------------ | ----- | --------------- |  |  | ----------- | - | ------ |  |  | ----- | ----------- |  |  | ------ | -
|                                                   |                | December 31, 2005 |        |  |                    |       | January 1, 2005 | 
|                                                   | Notionalamount |                   |        |  | Fair values        |       |                 |  |  | Fair values |  
|                                                   |                |                   | Assets |  |                    |       | Liabilities     |  |  |             |   | Assets |  |  |       | Liabilities | 
|                                                   |                |                   |        |  | (Euro in millions) |       |                 |  |  |             |   |        |  |  |      
|Derivatives held for trading                       |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Interest rate derivatives - over the counter (OTC) |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Interest rate swaps                                |                | 91,154            |        |  |                    | 556   |                 |  |  | (642        | ) |        |  |  | 577   |             |  |  | (637   | )
|Cross-currency interest rate swaps(1)              |                | 1,509             |        |  |                    | 766   |                 |  |  | (754        | ) |        |  |  | 679   |             |  |  | (508   | )
|Forward rate agreements                            |                | 17,056            |        |  |                    | 8     |                 |  |  | (7          | ) |        |  |  | 14    |             |  |  | (14    | )
|Interest rate options                              |                | 2,716             |        |  |                    | 4     |                 |  |  | (4          | ) |        |  |  | 8     |             |  |  | (8     | )
|Other interest rate contracts                      |                | 178               |        |  |                    |      |                 |  |  |            |   |        |  |  |      |             |  |  |       |  
|Total OTC interest rate contracts                  |                | 112,613           |        |  |                    | 1,334 |                 |  |  | (1,407      | ) |        |  |  | 1,278 |             |  |  | (1,167 | )
|Interest rate derivatives - exchange traded        |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Interest rate futures                              |                | 14,272            |        |  |                    |      |                 |  |  | (5          | ) |        |  |  |      |             |  |  | (2     | )
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Interest rate contracts total                      |                | 126,885           |        |  |                    | 1,334 |                 |  |  | (1,412      | ) |        |  |  | 1,278 |             |  |  | (1,169 | )
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Foreign exchange derivatives - (OTC)               |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Currency forwards                                  |                | 2,451             |        |  |                    | 8     |                 |  |  | (11         | ) |        |  |  |      |             |  |  |       |  
|Currency swaps                                     |                | 14,640            |        |  |                    | 232   |                 |  |  | (216        | ) |        |  |  | 567   |             |  |  | (826   | )
|Currency options bought & sold                     |                | 2,664             |        |  |                    | 21    |                 |  |  | (17         | ) |        |  |  | 24    |             |  |  | (25    | )
|Total OTC foreign exchange derivatives             |                | 19,755            |        |  |                    | 261   |                 |  |  | (244        | ) |        |  |  | 591   |             |  |  | (851   | )
|Foreign exchange derivatives - exchange traded     |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Foreign exchange traded options                    |                | 44                |        |  |                    |      |                 |  |  |            |   |        |  |  |      |             |  |  |       |  
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Foreign exchange derivatives total                 |                | 19,799            |        |  |                    | 261   |                 |  |  | (244        | ) |        |  |  | 591   |             |  |  | (851   | )
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Equity index contracts (OTC)                       |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Equity index options                               |                | 4,386             |        |  |                    | 254   |                 |  |  | (123        | ) |        |  |  | 112   |             |  |  | (136   | )
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Equity index contracts total                       |                | 4,386             |        |  |                    | 254   |                 |  |  | (123        | ) |        |  |  | 112   |             |  |  | (136   | )
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Total trading contracts                            |                | 151,070           |        |  |                    | 1,849 |                 |  |  | (1,779      | ) |        |  |  | 1,981 |             |  |  | (2,156 | )
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Derivatives designated as fair value hedges        |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Interest rate swaps (OTC)                          |                | 32,923            |        |  |                    | 368   |                 |  |  | (170        | ) |        |  |  | 263   |             |  |  | (340   | )
|Derivatives designated as cash flow hedges         |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Interest rate swaps (OTC)                          |                | 18,518            |        |  |                    | 222   |                 |  |  | (18         | ) |        |  |  | 337   |             |  |  | (45    | )
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Total hedging contracts                            |                | 51,441            |        |  |                    | 590   |                 |  |  | (188        | ) |        |  |  | 600   |             |  |  | (385   | )
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  
|Total derivative financial instruments             |                | 202,511           |        |  |                    | 2,439 |                 |  |  | (1,967      | ) |        |  |  | 2,581 |             |  |  | (2,541 | )
|                                                   |                |                   |        |  |                    |       |                 |  |  |             |   |        |  |  |       |             |  |  |        |  



|(1) | Cross currency interest rate swaps have an exchange of nominals on settlement. Such nominals are therefore shown gross on the balance sheet.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

The total hedging ineffectiveness charged to the income statement on cash flow hedges amounted to 4.3 million.



152



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Risk management activities

In addition to meeting customer needs, the Groups principal objective in holding or issuing derivatives for purposes other than trading is the management of interest rate and foreign exchange rate risks.

The operations of the Group are exposed to interest rate risk arising from the fact that assets and liabilities mature or reprice at
different times or in differing amounts. Derivatives are used 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. Similarly, foreign exchange and equity derivatives can be used to hedge the Groups exposure to foreign exchange and equity risk, as required.

Derivative prices fluctuate in value as the underlying interest rate, foreign exchange rate, or equity prices change. If the derivatives are purchased or sold as hedges of balance sheet items, the appreciation or
depreciation of the derivatives, will generally be offset by the unrealised depreciation or appreciation of the hedged items. This means that separate disclosure of market risk on derivatives used for hedging purposes is not meaningful.

To achieve its risk management objective, the Group uses a combination of derivative financial instruments, particularly interest rate swaps, futures
and options, as well as other contracts. The tables on the pages 154 and 155 present the notional and fair value amounts, weighted average maturity and weighted average receive and pay rates for instruments held for risk management purposes entered
into by the Group at December 31, 2005 and 2004. The table relating to December 31, 2004 was prepared under Irish GAAP.



153



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



These tables present the notional principal and fair value amounts, weighted average maturity and
weighted average receive and pay rates for instruments held for risk management purposes entered into by the Group for 2005 and 2004.

The
table for 2004 was prepared under Irish GAAP and accordingly the classification is that reported in the 2004 Report and Accounts.



|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|--------------------------------------------------------- |  | ------------------ |  | ------------------------------- |  | --------------------- |  | ---------- |  | ------------------ | -
|                                                          |  | December 31, 2005  | 
|                                                          |  | Notional amount    |  | Weightedaveragematurityin years |  | Weighted average rate |  | Fair value | 
|                                                          |  |                    |  | Receive                         |  | Pay                   | 
|                                                          |  | (Euro in millions) |  |                                 |  | %                     |  | %          |  | (Euro in millions) |  
|Interest rate derivatives designated as fair value hedges |  |                    |  |                                 |  |                       |  |            |  |                    |  
|Interest rate swaps:                                      |  |                    |  |                                 |  |                       |  |            |  |                    |  
|Pay fixed                                                 |  |                    |  |                                 |  |                       |  |            |  |                    |  
|1 year or less                                            |  | 1,248              |  | 0.42                            |  | 2.81                  |  | 3.99       |  | (21                | )
|1 - 5 years                                               |  | 1,902              |  | 2.52                            |  | 3.09                  |  | 4.40       |  | (53                | )
|5 years or more                                           |  | 872                |  | 12.85                           |  | 3.44                  |  | 5.10       |  | (62                | )
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|                                                          |  | 4,022              |  | 4.11                            |  | 3.08                  |  | 4.42       |  | (136               | )
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|Receive fixed                                             |  |                    |  |                                 |  |                       |  |            |  |                    |  
|1 year or less                                            |  | 19,874             |  | 0.27                            |  | 3.14                  |  | 2.98       |  | 153                |  
|1 - 5 years                                               |  | 170                |  | 3.56                            |  | 5.00                  |  | 4.33       |  | 14                 |  
|5 years or more                                           |  | 1,834              |  | 14.63                           |  | 5.34                  |  | 5.11       |  | 155                |  
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|                                                          |  | 21,878             |  | 1.50                            |  | 3.33                  |  | 3.17       |  | 322                |  
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|Pay/receive floating                                      |  |                    |  |                                 |  |                       |  |            |  |                    |  
|1 year or less                                            |  | 10                 |  | 0.75                            |  | 3.69                  |  | 3.88       |  |                   |  
|1 - 5 years                                               |  | 5,231              |  | 2.28                            |  | 2.56                  |  | 2.51       |  | 8                  |  
|5 years or more                                           |  | 1,782              |  | 8.17                            |  | 2.71                  |  | 2.67       |  | 4                  |  
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|                                                          |  | 7,023              |  | 3.77                            |  | 2.60                  |  | 2.55       |  | 12                 |  
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|Interest rate derivatives designated cash flow hedges     |  |                    |  |                                 |  |                       |  |            |  |                    |  
|Interest rate swaps:                                      |  |                    |  |                                 |  |                       |  |            |  |                    |  
|Pay fixed                                                 |  |                    |  |                                 |  |                       |  |            |  |                    |  
|1 year or less                                            |  | 284                |  | 0.59                            |  | 2.27                  |  | 2.99       |  |                   |  
|1 - 5 years                                               |  | 2,311              |  | 2.97                            |  | 2.45                  |  | 3.05       |  | (5                 | )
|5 years or more                                           |  | 266                |  | 6.93                            |  | 2.38                  |  | 3.82       |  | (9                 | )
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|                                                          |  | 2,861              |  | 3.10                            |  | 2.42                  |  | 3.12       |  | (14                | )
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|Receive fixed                                             |  |                    |  |                                 |  |                       |  |            |  |                    |  
|1 year or less                                            |  | 2,121              |  | 0.52                            |  | 4.11                  |  | 2.64       |  | 12                 |  
|1 - 5 years                                               |  | 10,714             |  | 2.66                            |  | 3.87                  |  | 2.68       |  | 131                |  
|5 years or more                                           |  | 2,822              |  | 6.71                            |  | 4.62                  |  | 2.56       |  | 75                 |  
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  
|                                                          |  | 15,657             |  | 3.10                            |  | 4.04                  |  | 2.65       |  | 218                |  
|                                                          |  |                    |  |                                 |  |                       |  |            |  |                    |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|-------------------------------- |  | ------------------ |  | ------------------------------- |  | --------------------- |  | -------------------- |  | ------------------ | -
|                                 |  | December 31, 2004  | 
|                                 |  | Notional amount    |  | Weightedaveragematurityin years |  | Weighted average rate |  | Estimated Fair value | 
|                                 |  |                    |  | Receive                         |  | Pay                   | 
|                                 |  | (Euro in millions) |  |                                 |  | %                     |  | %                    |  | (Euro in millions) |  
|Interest rate swaps:             |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|Receive fixed                    |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|1 year or less                   |  | 16,640             |  | 0.31                            |  | 2.84                  |  |                      |  | 100                |  
|1 - 5 years                      |  | 1,210              |  | 2.84                            |  | 4.53                  |  |                      |  | 60                 |  
|5 years or more                  |  | 2,304              |  | 9.38                            |  | 3.46                  |  |                      |  | 107                |  
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|                                 |  | 20,154             |  | 1.50                            |  | 3.01                  |  | 2.11                 |  | 267                |  
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|Pay fixed                        |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|1 year or less                   |  | 1,339              |  | 0.55                            |  |                       |  | 3.95                 |  | (20                | )
|1 - 5 years                      |  | 3,234              |  | 2.94                            |  |                       |  | 4.47                 |  | (132               | )
|5 years or more                  |  | 1,640              |  | 9.51                            |  |                       |  | 4.14                 |  | (124               | )
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|                                 |  | 6,213              |  | 4.16                            |  | 2.13                  |  | 4.27                 |  | (276               | )
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|Pay/receive floating             |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|1 year or less                   |  | 500                |  | 0.42                            |  | 4.26                  |  |                      |  |                   |  
|1 - 5 years                      |  | 1,610              |  | 2.73                            |  | 2.14                  |  |                      |  | 3                  |  
|5 years or more                  |  | 600                |  | 10.10                           |  | 2.18                  |  |                      |  |                   |  
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|                                 |  | 2,710              |  | 3.94                            |  | 2.54                  |  | 2.49                 |  | 3                  |  
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|Forward rate agreements:         |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|Loans                            |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|1 year or less                   |  | 1,931              |  | 0.61                            |  | 2.52                  |  |                     |  | 1                  |  
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|                                 |  | 1,931              |  | 0.61                            |  | 2.52                  |  |                     |  | 1                  |  
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|Deposits                         |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|1 year or less                   |  | 665                |  | 0.99                            |  |                      |  | 3.38                 |  | (2                 | )
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|                                 |  | 665                |  | 0.99                            |  |                      |  | 3.38                 |  | (2                 | )
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|Other interest rate derivatives: |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|1 year or less                   |  | 22                 |  | 0.75                            |  | 2.17                  |  | 6.75                 |  | (5                 | )
|1 - 5 years                      |  |                   |  |                                |  |                      |  |                     |  |                   |  
|5 years or more                  |  |                   |  |                                |  |                      |  |                     |  |                   |  
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  
|                                 |  | 22                 |  | 0.75                            |  | 2.17                  |  | 6.75                 |  | (5                 | )
|                                 |  |                    |  |                                 |  |                       |  |                      |  |                    |  

The carrying value of the interest rate derivative financial instruments held for risk management
purposes was 48 million.

Netting financial assets and financial liabilities

Derivatives financial instruments are shown on the balance sheet at their fair value, those with a positive fair value are reported as assets and those with a negative fair value are reported as liabilities.

The Group has a number of master netting agreements in place which allow it to net positive and negative fair values on derivatives
contracts in the event of default by the counterparty. The effect of netting contracts subject to master netting agreements would reduce the balance sheet carrying amount of derivative assets and liabilities by  502 million.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|50. | COMMITMENTS
|--- | -----------

Capital expenditure

Estimated outstanding commitments for capital expenditure not provided for in the accounts amounted to 188 million (2004: 99 million).
Capital expenditure authorized, but not yet contracted for, amounted to 140 million (2004: 214 million). The general purpose of the capital commitments is buildings, predominantly the development of Bankcentre, and technology related
expenditure.

Operating lease rentals

The annual commitments in respect of land and buildings under non-cancelable operating leases are set out below:



|                  |  |                    |  |     
|----------------- |  | ------------------ |  | ----
|                  |  | December 31,      
|                  |  | 2005               |  | 2004
|                  |  | (Euro in millions)
|One year          |  | 18                 |  | 19  
|One to five years |  | 130                |  | 72  
|Over five years   |  | 513                |  | 210 
|                  |  |                    |  |     
|Total             |  | 661                |  | 301 
|                  |  |                    |  |     

The total of future minimum sublease payments expected to be received under non-cancelable subleases at the
balance sheet date were 13 million (2004: 8million).

Operating lease payments recognized as an expense for this period
were 37 million (2004: 37 million). Sublease income amounted to 1 million (2004: 1 million).



|51. | REPORT ON DIRECTORS REMUNERATION AND INTERESTS
|--- | -----------------------------------------------

Information relating to Directors remuneration and interests is included in Item 6 of this Report.



|52. | CURRENCY INFORMATION
|--- | --------------------



|      |  |                    |  |                    |  |         |  |        
|----- |  | ------------------ |  | ------------------ |  | ------- |  | -------
|      |  | Assets             |  | Liabilities       
|      |  | 2005               |  | 2004               |  | 2005    |  | 2004   
|      |  | (Euro in millions) |  | (Euro in millions)
|Euro  |  | 75,806             |  | 55,469             |  | 76,831  |  | 55,655 
|Other |  | 57,408             |  | 45,640             |  | 56,383  |  | 45,454 
|      |  |                    |  |                    |  |         |  |        
|      |  | 133,214            |  | 101,109            |  | 133,214 |  | 101,109
|      |  |                    |  |                    |  |         |  |        



|53. | REPORTING CURRENCY AND EXCHANGE RATES
|--- | -------------------------------------

The currency
used in these accounts is the euro which is denoted by EUR or the symbol . Each euro is made up of one hundred cent, denoted by the symbol c in these accounts.

The exchange rates used in the preparation of the Consolidated Financial Statements for the years ended December 31, 2005 and 2004 were as follows:



|        |  |              |  |       
|------- |  | ------------ |  | ------
|        |  | December 31,
|        |  | 2005         |  | 2004  
|/US$   |  |              |  |       
|Closing |  | 1.1797       |  | 1.3621
|Average |  | 1.2484       |  | 1.2474
|/Stg£  |  |              |  |       
|Closing |  | 0.6853       |  | 0.7051
|Average |  | 0.6851       |  | 0.6813
|/PLN   |  |              |  |       
|Closing |  | 3.8600       |  | 4.0845
|Average |  | 4.0276       |  | 4.5314



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|54. | CAPITAL ADEQUACY INFORMATION
|--- | ----------------------------



|                                  |  |                    |  |               
|--------------------------------- |  | ------------------ |  | --------------
|                                  |  | December 31,2005   |  | January 1,2005
|                                  |  | (Euro in millions)
|Risk weighted assets              |  |                    |  |               
|Banking book:                     |  |                    |  |               
|On balance sheet                  |  | 79,520             |  | 62,770        
|Off-balance sheet                 |  | 14,682             |  | 10,960        
|                                  |  |                    |  |               
|                                  |  | 94,202             |  | 73,730        
|                                  |  |                    |  |               
|Trading book:                     |  |                    |  |               
|Market risks                      |  | 6,891              |  | 5,149         
|Counterparty and settlement risks |  | 563                |  | 712           
|                                  |  |                    |  |               
|                                  |  | 7,454              |  | 5,861         
|                                  |  |                    |  |               
|Total risk weighted assets        |  | 101,656            |  | 79,591        
|                                  |  |                    |  |               
|Capital                           |  |                    |  |               
|Tier 1                            |  | 7,275              |  | 6,510         
|Tier 2                            |  | 4,089              |  | 2,312         
|                                  |  |                    |  |               
|                                  |  | 11,364             |  | 8,822         
|Supervisory deductions            |  | 487                |  | 302           
|                                  |  |                    |  |               
|Total Capital                     |  | 10,877             |  | 8,520         
|                                  |  |                    |  |               



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|55. | SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INTERNATIONAL AND UNITED STATES ACCOUNTING PRINCIPLES
|--- | ------------------------------------------------------------------------------------------------

The following is a description of the significant differences between International Financial Reporting Standards (IFRS) and those applicable
in the United States of America (US GAAP).



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|IFRS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | US GAAP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
|Credit Provisioning                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
|Under IAS 39, impairment provisions are recognized on an incurred loss basis if there is objective evidence that the Group will be unable to collect
all amounts due on a loan according to the original contractual terms.  Individual credit exposures are evaluated based upon the borrowers character, overall financial condition, resources and payment record, the prospects for recovery from the realization of collateral or the calling in of guarantees
where applicable.  The estimated recoverable amount is the present
value of expected future cash flows, which may result from restructuring or liquidation. Impairment is measured and allowances for credit losses are established for the difference between the carrying amount and the estimated recoverable
amount.  IAS 39 allows collective assessment of impairment for
individually insignificant items. Smaller value impaired loans are grouped together in homogeneous pools sharing common characteristics and impairment is measured by reference to the loss history experience of the asset pool.  Where no objective evidence of impairment exists for an individual asset but
there are indications of incurred losses in the portfolio, IAS 39 permits the creation of provisions for credit losses on an incurred loss basis, based on statistical data.  Upon impairment, the accrual of interest income based on the original terms of
the claim is discontinued, but the increase of the present value of impaired claims due to the passage of time is reported as interest income. If, in a subsequent period, an event occurs that reduces/reverses the impairment loss, this reversal is
recognized in the income statement. |  | Under SFAS 114 Accounting by Creditors for Impairment of a Loan, impairment should be assessed on a loan by loan basis. If an impaired loan has risk characteristics similar to other
loans, all such loans can be aggregated based on historical experience. The average recovery period and average recovery amount can be used as a method for calculating the cash flows and timing of cash flows for impaired loans. Impairment should be
calculated based on the present value of expected future cash flows discounted at the loans effective interest rate. Impairment losses once recognized cannot be reversed, until cash has been received.                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
|Stock Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
|IFRS 2 Share-based payment requires a fair value based method of accounting for all share-based-payments. This value is determined using an options pricing model. The expense is
recognized over the period in which the options are expected to vest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | The Group continues to apply the provisions of APB 25 - Accounting for stock issued to employees and accounts for share based payments using the intrinsic value
method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
|Derivatives and hedging activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
|IAS 39 Financial instruments: recognition and measurement requires all derivatives be recognized as either assets or liabilities in the balance sheet at their fair value. The
accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation as described below. In respect of derivatives that do not qualify for hedge accounting, the fair value adjustment is
reflected in the income statement. Derivative transactions entered into for hedging purposes are classified as fair value hedges if they hedge exposures to changes in the fair value of a recognized asset or liability or firm commitment.
Derivative transactions entered into for hedging purposes are classified as cash flow hedges if they are hedging the exposure to variable cash flows of a recognized asset or liability or of a highly probable forecast
transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | All derivatives are recognized as either assets or liabilities in the statement of financial position and measured at fair value. The recognition of the changes in the fair value of a derivative
depends upon its intended use. Derivatives that do not qualify for hedging treatment must be adjusted to fair value through earnings. If certain conditions are met, a derivative may be specifically designed as (a) a hedge of the exposure to changes
in the fair value of a recognised asset or liability or an unrecognised firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognised firm commitment, an available-for-sale security, or



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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|IFRS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | US GAAP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Interest income and expense on derivatives classified as hedges is recorded within interest income or expense as appropriate.
 The mark to market of derivatives classified as fair value hedges is
recognized in the income statement within other financial income. The hedged item in a fair value hedge is fair valued with respect to the risk being hedged only as long as the hedge remains effective and the mark to market of the hedged item is
recorded in other financial income.  The mark to market of
derivatives designated as cash flow hedges is accounted for in equity, net of the deferred tax impact. Subsequently it is released into the income statement in line with the income statement recognition of the element of the hedged asset, liability
or highly probable forecast transaction. Any ineffective portion is reported within other financial income in the income statement as it arises.  Where a derivative originally classified as a fair value hedge no longer meets the effectiveness tests, or the hedge relationship has ceased for any
reason, the underlying hedged position is no longer marked to market. The fair value adjustment of the hedged item is amortized to the profit and loss account on an effective interest rate basis from the date the hedging relationship
ceases.  Where a cash flow hedging instrument expires or is sold,
terminated or exercised, the cumulative gain or loss on the instrument, that remains recognized directly in equity from the period when the hedge was effective, is released from equity in line with the income statement recognition of the underlying
hedged position. |  | foreign currency denominated forecasted transaction. The accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designations.  The Group
has elected not to satisfy the prescriptive hedging requirements of SFAS 133, which requires that forecast transactions be specifically identified. Therefore, IFRS hedging derivatives have been marked to market with the gain or loss recognized in
net income for US GAAP purposes.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Revaluation of property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Property may be carried at either original cost or subsequent valuation less related depreciation, calculated where applicable on the revalued amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Revaluations are not permitted to be reflected in the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Deferred taxation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Under IAS 12, Income Taxes deferred tax liabilities and assets are generally recognized in respect of all temporary differences, subject to assessment of the recoverability of
deferred tax assets. Deferred tax assets are recognized, only to the extent that it is probable that sufficient taxable profits will be available against which these differences can be utilized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | The liability method is used with deferred tax assets and liabilities are recognized for all temporary differences. A valuation allowance is raised against a deferred tax asset where it is more
likely than not that some portion of the deferred tax asset will not be realized.                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|From January 1, 2004, goodwill recognized in the IFRS balance sheet is not amortized but tested annually for impairment. Goodwill written off to reserves prior to January 1, 2004 in
accordance with Irish GAAP has not been reinstated on the balance sheet.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Goodwill arising on acquisitions prior to December 31, 2001 was capitalized and written off over its useful life, up to a maximum of 20 years. With effect from January 1, 2002, due to the
introduction of FAS 142 Goodwill and Other Intangible Assets, goodwill is not amortized but retained at its value and reviewed for impairment. Goodwill is reviewed for impairment on an annual basis.                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Long-term assurance policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|The Group accounts for its insurance contracts using the embedded value basis. The embedded values comprises two components: the net assets attributable to the Group and the present value of the
in-force business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Premiums are recognized as revenue when due from policyholders. The costs of claims are recognized when insured events occur. For traditional business, the present value of estimated future
policy benefits is accrued when premium revenue is recognised.                                                                                                                                                                                                                                      



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|                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|IFRS                                                                                                                                                                                                                                                                                                                                 |  | US GAAP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                     | 
|                                                                                                                                                                                                                                                                                                                                     |  | Acquisition costs are capitalized and charged to expense in proportion to premium revenue recognized. For unit-linked business, acquisition costs are amortized over the life of the contracts at
a constant rate based on the present value of estimated gross profits. Initial income in respect of future services is not earned in the period assessed but recognized as income over the same amortization period and using the same amortization
schedule as for acquisition costs. Holdings of shares in Allied Irish Banks, p.l.c., are netted off against ordinary stockholders equity                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                     | 
|Retirement benefits                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                     | 
|Actuarial gains and losses are recognized through the statement of recognized income and expenditure. Scheme assets are valued at fair value and scheme liabilities are measured using the
projected unit method. The net scheme assets and liabilities, reduced by deferred tax amounts are shown on the face of the balance sheet. |  | SFAS 87 Employers Accounting for Pensions prescribes a similar method of actuarial valuations for pension liabilities and measurements of plan assets at fair value. Where the
accumulated benefit obligation exceeds the value of plan assets, the Group recognizes an additional minimum pension liability equal to this excess, as long as the excess is greater than any accrual already established for unfunded pension costs.
SFAS 87 requires recognition of all actuarial gains and losses in the statement of income. Under US GAAP, the Group elects to use the corridor method, where by actuarial gains and losses outside a certain range are recognized in the
income statement, in equal amounts over the remaining service lives of current employees. That range is equal to 10% of the greater of plan assets and plan liabilities. The remaining additional minimum pension liability is recognized directly in
Other Comprehensive income.
|                                                                                                                                                                                                                                                                                                                                     | 
|Available for sale securities                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                     | 
|IAS 39 states that changes in the value of debt securities attributable to foreign exchange fluctuations are taken to net income.  Unquoted equity shares are measured at fair value.                                                                                                                                                |  | EITF 96-15 Accounting for the Effects of Changes in Foreign Currency Exchange Rates on Foreign Currency Denominated Available for sale Debt Securities, states that the change in
value of debt securities attributable to foreign exchange fluctuations is taken directly to reserves - Other Comprehensive Income and transferred to the income statement on disposal of the instrument. Unquoted equity shares are measured
at cost, less any provisions for impairment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                     | 
|Special purpose entities/variable interest entities                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                     | 
|Special purpose entities (SPEs) are consolidated by an entity when the substance of the relationship between an entity and the SPE indicates that the SPE is controlled by that
entity.                                                                                                                                              |  | Variable interest entities (VIEs) are consolidated by their primary beneficiary. A company is deemed to be a primary beneficiary where it is subject to a majority of the risk of loss
from the VIEs activities or entitled to receive a majority of the VIEs residuals returns or both.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                     | 
|Accounting for Investment in M&T Bank                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                     | 
|The Groups share of the assets and liabilities of M&T as at April 1, 2003 have been recorded at fair value in accordance with the accounting policies of the Group. In addition,
the Groups share of the profits of M&T reflects the IFRS accounting rules applied by the Group.                                                   |  | Certain accounting policies used in relation to both the investment in M&T and the Groups share of profits of M&T are different when compared to IFRS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                     | 
|Construction contract income/sale and leaseback                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                     | 
|Income from the sale and leaseback of the Bankcentre development is accounted for under IAS 11 - Construction Contracts and SIC 27 - Evaluating the Substance of Transactions
Involving the Legal Form of a Lease. Such income is therefore recognized on a percentage completion basis.                                         |  | The sale and leaseback of the Bankcentre development is accounted for under SFAS 28 - Accounting for Sales with Leasebacks - an amendment of FASB Statement No. 13 and as such the
income is deferred and recognized over the lease term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|IFRS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | US GAAP                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Loan Origination                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 
|Interest income and expense is recognized in the income statement for all interest bearing financial instruments using the effective interest method.
In calculating the effective interest rate, estimated cash flows are calculated considering all contractual terms of the financial instrument but excluding future credit losses. The calculation takes into account all fees, including those for early
redemption, and points paid or received between parties to the contract that are integral part of the effective interest rate, transactions costs and all other premiums and discounts.  All costs associated with mortgage incentive schemes are included in the
effective interest calculation. Fees and commissions payable to third parties in connection with lending arrangements, where these are direct and incremental costs related to the issue of a financial instrument, are included in interest income as
part of the effective interest rate.  Under IAS 39 certain internal
costs are excluded from the effective interest calculations and are taken to the income statement as incurred. |  | SFAS 91 Accounting for Non-refundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases requires loan origination fees and direct costs
(including certain internal costs) to be deferred and recognized over the life of the loan as an adjustment of yield.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Consolidated net income



|                                                                                                             |  |                          |        |   |      |       |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ------ | - | ---- | ----- | -
|                                                                                                             |  | Years ended December 31, |       
|                                                                                                             |  | 2005                     |        |   | 2004 |      
|                                                                                                             |  | (Euro in millions)       |       
|Net income (Group profit attributable to the stockholders of AIB) as in the consolidated statement of income |  |                          | 1,343  |   |      | 1,150 |  
|Adjustments in respect of:                                                                                   |  |                          |        |   |      |       |  
|Depreciation of freehold and long leasehold property                                                         |  |                          | 2      |   |      | 2     |  
|Disposal of revalued properties                                                                              |  |                          | 2      |   |      |      |  
|Long-term assurance policies                                                                                 |  |                          | (12    | ) |      | (58   | )
|Retirement benefits                                                                                          |  |                          | (59    | ) |      | (29   | )
|Securities held for hedging purposes                                                                         |  |                          |       |   |      | 5     |  
|Derivatives FAS 133 adjustment                                                                               |  |                          | (90    | ) |      | 113   |  
|Share of income of associated undertakings                                                                   |  |                          | 4      |   |      | (9    | )
|Share based payment                                                                                          |  |                          | 16     |   |      | 4     |  
|Taxation                                                                                                     |  |                          | (14    | ) |      | (1    | )
|Construction contract income/sale and leaseback                                                              |  |                          | (53    | ) |      |      |  
|Foreign exchange losses on available for sale securities                                                     |  |                          | (352   | ) |      |      |  
|Loan impairment                                                                                              |  |                          | 132    |   |      |      |  
|Loan origination                                                                                             |  |                          | (5     | ) |      |      |  
|Other                                                                                                        |  |                          | (11    | ) |      | (8    | )
|Deferred tax effect of the above adjustments                                                                 |  |                          | 63     |   |      | 7     |  
|                                                                                                             |  |                          |        |   |      |       |  
|Net income in accordance with US GAAP                                                                        |  |                          | 966    |   |      | 1,176 |  
|                                                                                                             |  |                          |        |   |      |       |  
|Net income applicable to ordinary stockholders of AIB in accordance with US GAAP                             |  |                         | 928    |   |      | 1,169 |  
|                                                                                                             |  |                          |        |   |      |       |  
|Equivalent to                                                                                                |  | US$                      | 1,095  |   |      |       |  
|                                                                                                             |  |                          |        |   |      |       |  
|Income per American Depositary Share (ADS*) in accordance with US GAAP                                       |  |                         | 2.23   |   |      | 2.74  |  
|                                                                                                             |  |                          |        |   |      |       |  
|Equivalent to                                                                                                |  | US$                      | 2.63   |   |      |       |  
|                                                                                                             |  |                          |        |   |      |       |  
|Diluted income per American Depositary Share (ADS*) in accordance with US GAAP                               |  |                         | 2.22   |   |      | 2.73  |  
|                                                                                                             |  |                          |        |   |      |       |  
|Equivalent to                                                                                                |  | US$                      | 2.62   |   |      |       |  
|                                                                                                             |  |                          |        |   |      |       |  
|Year end exchange rate /US$                                                                                 |  |                          | 1.1797 |   |      |       |  
|                                                                                                             |  |                          |        |   |      |       |  



|* | An American Depositary Share represents two ordinary shares of 0.32 each.
|- | --------------------------------------------------------------------------

Comprehensive income



|                                                                                                                                           |  |                          |   |  |       |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | - |  | ----- | -
|                                                                                                                                           |  | Years ended December 31, |  
|                                                                                                                                           |  | 2005                     |   |  | 2004  |  
|                                                                                                                                           |  | (Euro in millions)       |  
|Net income in accordance with US GAAP                                                                                                      |  | 966                      |   |  | 1,176 |  
|Net movement in unrealized holding gains on investment securities arising during the period, net of tax of 43 million (2004; 10
million) |  | 302                      |   |  | 68    |  
|Minimum pension liability adjustment, net of tax of 73 million                                                                            |  | (171                     | ) |  |      |  
|Currency translation adjustments                                                                                                           |  | 306                      |   |  | (88   | )
|                                                                                                                                           |  |                          |   |  |       |  
|Comprehensive income                                                                                                                       |  | 1,403                    |   |  | 1,156 |  
|                                                                                                                                           |  |                          |   |  |       |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Consolidated ordinary stockholders equity



|                                                                   |  |                                            |       |   |      |       |  
|------------------------------------------------------------------ |  | ------------------------------------------ | ----- | - | ---- | ----- | -
|                                                                   |  | December 31,                               |      
|                                                                   |  | 2005                                       |       |   | 2004 |      
|                                                                   |  | (Euro in millions exceptper share amounts) |      
|Ordinary stockholders equity as in the consolidated balance sheet |  |                                            | 6,672 |   |      | 5,745 |  
|Revaluation of property                                            |  |                                            | (161  | ) |      | (165  | )
|Depreciation of freehold and long leasehold property               |  |                                            | (27   | ) |      | (27   | )
|Goodwill                                                           |  |                                            | 296   |   |      | 248   |  
|Long-term assurance policies                                       |  |                                            | (135  | ) |      | (334  | )
|Available-for-sale securities                                      |  |                                            | (50   | ) |      | 272   |  
|Securities held for hedging purposes                               |  |                                            |      |   |      | 2     |  
|Derivatives FAS 133 adjustment                                     |  |                                            |      |   |      | 46    |  
|Retirement benefits                                                |  |                                            | 1,111 |   |      | 1,137 |  
|Share based payment                                                |  |                                            |      |   |      | (4    | )
|Construction contract income/sale and leaseback                    |  |                                            | (53   | ) |      |      |  
|Taxation                                                           |  |                                            |      |   |      | 14    |  
|Loan origination fees deferred                                     |  |                                            |      |   |      | (85   | )
|Loan origination costs deferred                                    |  |                                            | 80    |   |      | 85    |  
|Loan impairment                                                    |  |                                            | (14   | ) |      |      |  
|Other recognized gains in associated undertakings                  |  |                                            | (39   | ) |      | (7    | )
|Share of income of associated undertakings                         |  |                                            | (2    | ) |      | 11    |  
|Other                                                              |  |                                            |      |   |      | 17    |  
|Deferred tax effect of the above adjustments                       |  |                                            | (83   | ) |      | (158  | )
|                                                                   |  |                                            |       |   |      |       |  
|Ordinary stockholders equity in accordance with US GAAP           |  |                                           | 7,595 |   |      | 6,797 |  
|                                                                   |  |                                            |       |   |      |       |  
|Equivalent to                                                      |  | US$                                        | 8,960 |   |      |       |  
|                                                                   |  |                                            |       |   |      |       |  
|Ordinary stockholders equity per ADS in accordance with US GAAP   |  |                                           | 17.57 |   |      | 15.96 |  
|                                                                   |  |                                            |       |   |      |       |  
|Equivalent to                                                      |  | US$                                        | 20.73 |   |      |       |  
|                                                                   |  |                                            |       |   |      |       |  
|Ordinary stockholders equity per ADS in accordance with IFRS      |  |                                           | 15.44 |   |      | 12.67 |  
|                                                                   |  |                                            |       |   |      |       |  
|Equivalent to                                                      |  | US$                                        | 18.21 |   |      |       |  
|                                                                   |  |                                            |       |   |      |       |  

Statement of changes in ordinary stockholders equity



|                                                        |  |                    |   |  |       |  
|------------------------------------------------------- |  | ------------------ | - |  | ----- | -
|                                                        |  | December 31,       |  
|                                                        |  | 2005               |   |  | 2004  |  
|                                                        |  | (Euro in millions) |  
|Opening balance                                         |  | 6,797              |   |  | 5,951 |  
|Net income for year                                     |  | 966                |   |  | 1,176 |  
|Dividends on equity shares                              |  | (532               | ) |  | (474  | )
|Dividends on other equity interests                     |  | (38                | ) |  | (7    | )
|Issue of shares                                         |  | 66                 |   |  | 185   |  
|Net change in available for sale securities, net of tax |  | 302                |   |  | 68    |  
|Minimum pension liability adjustment, net of tax        |  | (171               | ) |  |      |  
|Other recognized gains/losses                           |  | (79                | ) |  |      |  
|Net movement in own shares                              |  | (6                 | ) |  |      |  
|Currency translation adjustments                        |  | 306                |   |  | (88   | )
|Other movements                                         |  | (16                | ) |  | (14   | )
|                                                        |  |                    |   |  |       |  
|Closing balance                                         |  | 7,595              |   |  | 6,797 |  
|                                                        |  |                    |   |  |       |  



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Consolidated total assets



|                                                                 |  |                    |         |   |      |         |  
|---------------------------------------------------------------- |  | ------------------ | ------- | - | ---- | ------- | -
|                                                                 |  | December 31,       |        
|                                                                 |  | 2005               |         |   | 2004 |        
|                                                                 |  | (Euro in millions) |        
|Total assets as in the consolidated balance sheet                |  |                    | 133,214 |   |      | 101,109 |  
|Revaluation of property                                          |  |                    | (161    | ) |      | (165    | )
|Depreciation of freehold and long leasehold property             |  |                    | (27     | ) |      | (27     | )
|Goodwill                                                         |  |                    | 296     |   |      | 248     |  
|Available-for-sale securities                                    |  |                    | (50     | ) |      | 272     |  
|Derivatives FAS 133 adjustment                                   |  |                    |        |   |      | 46      |  
|Retirement benefits                                              |  |                    | 1,111   |   |      | 1,087   |  
|Long-term assurance policies                                     |  |                    | (135    | ) |      | (334    | )
|Share based payment                                              |  |                    |        |   |      | (4      | )
|Construction contract income/sale and leaseback                  |  |                    | (53     | ) |      |        |  
|Loan origination fees deferred                                   |  |                    |        |   |      | (85     | )
|Loan origination costs deferred                                  |  |                    | 80      |   |      | 85      |  
|Loan impairment                                                  |  |                    | (14     | ) |      |        |  
|Consolidation effect of Ark Life                                 |  |                    |        |   |      | (2,041  | )
|Investment in associated undertaking                             |  |                    | (41     | ) |      | 5       |  
|Acceptances                                                      |  |                    |        |   |      | 12      |  
|Other                                                            |  |                    |        |   |      | 45      |  
|                                                                 |  |                    |         |   |      |         |  
|Total assets in accordance with US GAAP                          |  |                   | 134,220 |   |      | 100,253 |  
|                                                                 |  |                    |         |   |      |         |  
|Equivalent to                                                    |  | US$                | 158,339 |   |      |         |  
|                                                                 |  |                    |         |   |      |         |  
|                                                                 |  |                   
|Consolidated total liabilities and ordinary stockholders equity |  |                    |         |   |      |         |  



|                                                                                         |  |                    |         |      |         |  
|---------------------------------------------------------------------------------------- |  | ------------------ | ------- | ---- | ------- | -
|                                                                                         |  | December 31,       |        
|                                                                                         |  | 2005               |         | 2004 |        
|                                                                                         |  | (Euro in millions) |        
|Total liabilities and ordinary stockholders equity as in the consolidated balance sheet |  |                    | 133,214 |      | 101,109 |  
|Ordinary stockholders equity                                                            |  |                    | 923     |      | 1,052   |  
|Acceptances                                                                              |  |                    |        |      | 12      |  
|Consolidation effect of Ark Life                                                         |  |                    |        |      | (2,041  | )
|Share based payment                                                                      |  |                    |        |      | 1       |  
|Securities held for hedging purposes                                                     |  |                    |        |      | (2      | )
|Other                                                                                    |  |                    |        |      | (60     | )
|Deferred taxation                                                                        |  |                    | 83      |      | 182     |  
|                                                                                         |  |                    |         |      |         |  
|Total liabilities and ordinary stockholders equity in accordance with US GAAP           |  |                   | 134,220 |      | 100,253 |  
|                                                                                         |  |                    |         |      |         |  
|Equivalent to                                                                            |  | US$                | 158,339 |      |         |  
|                                                                                         |  |                    |         |      |         |  



164



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Debt securities

The following table shows the maturity distribution of the available-for-sale investment portfolio of the Group at December 31, 2005 based upon market value.



|                                       |  |                                                                                   |  |                               |  |                                 |  |               |  |       
|-------------------------------------- |  | --------------------------------------------------------------------------------- |  | ----------------------------- |  | ------------------------------- |  | ------------- |  | ------
|                                       |  | Maturity distribution of available-for-sale investment portfolioDecember 31,
2005
|                                       |  | Maturing                                                                         
|                                       |  | In oneyear orless                                                                 |  | After one yearthrough 5 years |  | After five yearsthrough10 years |  | After10 years |  | Total 
|                                       |  | (Euro in millions)                                                               
|Irish Government                       |  | 47                                                                                |  | 246                           |  | 22                              |  | 177           |  | 492   
|Other European Government              |  | 2,705                                                                             |  | 3,124                         |  | 991                             |  |              |  | 6,820 
|Non European Government Securities     |  | 140                                                                               |  | 501                           |  | 394                             |  |              |  | 1,035 
|Collateralized mortgage obligations(1) |  |                                                                                  |  |                              |  | 110                             |  | 528           |  | 638   
|Other asset backed securities          |  | 2                                                                                 |  | 48                            |  | 149                             |  | 335           |  | 534   
|Other securities                       |  | 1,931                                                                             |  | 3,726                         |  | 1,199                           |  | 318           |  | 7,174 
|                                       |  |                                                                                   |  |                               |  |                                 |  |               |  |       
|Total                                  |  | 4,825                                                                             |  | 7,645                         |  | 2,865                           |  | 1,358         |  | 16,693
|                                       |  |                                                                                   |  |                               |  |                                 |  |               |  |       

---

|(1) | The maturity distribution is based upon long-term cash flow estimates for each security type
and coupon rate.
|--- | -------------------------------------------------------------------------------------------------------------

The following table categorizes AIB Groups available-for-sale investment portfolio by maturity and
weighted average yield at December 31, 2005.



|                                    |  |                    |  |                           |  |                            |  |                |  |       |  |         |  |       |  |        
|----------------------------------- |  | ------------------ |  | ------------------------- |  | -------------------------- |  | -------------- |  | ----- |  | ------- |  | ----- |  | -------
|                                    |  | December 31, 2005 
|                                    |  | Within 1 year      |  | After 1 butwithin 5 years |  | After 5 butwithin 10 years |  | After 10 years
|                                    |  | Euro               |  | Yield %                   |  | Euro                       |  | Yield %        |  | Euro  |  | Yield % |  | Euro  |  | Yield %
|                                    |  | (Euro in millions)
|Irish Government                    |  | 47                 |  | 5.4                       |  | 246                        |  | 4.0            |  | 22    |  | 4.3     |  | 177   |  | 4.1    
|Other European Government           |  | 2,705              |  | 3.1                       |  | 3,124                      |  | 3.2            |  | 991   |  | 4.1     |  |      |  |       
|Non European Government Securities  |  | 140                |  | 3.6                       |  | 501                        |  | 4.5            |  | 394   |  | 4.2     |  |      |  |       
|Collateralized mortgage obligations |  |                   |  |                          |  |                           |  |               |  | 110   |  | 3.4     |  | 528   |  | 2.3    
|Other asset backed securities       |  | 2                  |  | 4.7                       |  | 48                         |  | 5.1            |  | 149   |  | 6.2     |  | 335   |  | 4.1    
|Other securities                    |  | 1,931              |  | 3.9                       |  | 3,726                      |  | 3.8            |  | 1,199 |  | 3.9     |  | 318   |  | 4.1    
|                                    |  |                    |  |                           |  |                            |  |                |  |       |  |         |  |       |  |        
|Total                               |  | 4,825              |  | 3.4                       |  | 7,645                      |  | 3.6            |  | 2,865 |  | 4.2     |  | 1,358 |  | 3.4    
|                                    |  |                    |  |                           |  |                            |  |                |  |       |  |         |  |       |  |        

The weighted average yield for each range of maturities is calculated by dividing the annual
interest prevailing at the balance sheet date by market value of securities held at that date.

Investment securities sales

In the available-for-sale portfolio, proceeds from sales of debt securities during the years ended December 31, 2005 and 2004 amounted to 9
billion and 10 billion respectively. Gross realized gains and losses arising on the sale of these debt securities were as follows:



|                      |  |                          |   |  |      |  
|--------------------- |  | ------------------------ | - |  | ---- | -
|                      |  | Years ended December 31, |  
|                      |  | 2005                     |   |  | 2004 |  
|                      |  | (Euro in millions)       |  
|Gross realized gains  |  | 75                       |   |  | 23   |  
|Gross realized losses |  | (58                      | ) |  | (8   | )
|                      |  |                          |   |  |      |  
|                      |  | 17                       |   |  | 15   |  
|                      |  |                          |   |  |      |  

There were no investment securities classified as held-to-maturity during the years ended
December 31, 2005 and 2004. The cost of securities sold by the Group is determined using both the portfolio method of average cost and the specific identification method.



165



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Equity securities

In preparing its US GAAP information, the Group has applied SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities.

Equity securities sales

In the
available-for-sale portfolio, proceeds from sales of equity securities during the years ended December 31, 2005 and 2004 amounted to 8 million and 10 million respectively. Gross realized gains and losses arising on the
sale of these equity securities were as follows:



|                      |  |                          |  |     
|--------------------- |  | ------------------------ |  | ----
|                      |  | Years ended December 31,
|                      |  | 2005                     |  | 2004
|                      |  | (Euro in millions)      
|Gross realized gains  |  | 2                        |  | 2   
|Gross realized losses |  |                         |  |    
|                      |  |                          |  |     
|                      |  | 2                        |  | 2   
|                      |  |                          |  |     

Loan impairment

In January 2005, the Group introduced a new impairment provisioning methodology. This methodology included a number of changes in the approach used to estimate the loan impairment provisions and the accumulation and examination of
additional information relating to credit trends and other factors relevant to the Groups loan portfolio. The application of this revised methodology and the consideration of this additional information had the impact of reducing the estimate
of the total credit provisions by 146 million at January 1, 2005. This has been treated as a change in estimate in the 2005 income statement under US GAAP.

The consolidated net income reconciliation also includes an adjustment of 14 million debit relating to the reversal of impairment losses on loans where cash has not been received.

Special purpose vehicles/variable interest entities

The Group has a significant variable interest in four collateralized debt obligations (CDOs) set up since 2001, three of which invest in European sub investment grade leveraged finance assets and one in US High Yield Bonds. The
cumulative size of these CDOs at December 31, 2005 is 1,481 million (2004: 1,484 million). The Groups investment and maximum exposure totals 44 million (2004: 47 million). There is no recourse to the Group by third
parties in relation to these CDOs. The Group was deemed not to be the primary beneficiary of any VIE at December 31, 2005.

Retirement benefits

The provisions of SFAS No. 87 Employers Accounting for Pensions is applied when accounting for retirement
benefits under US GAAP. The disclosure requirements of SFAS No. 87 have been amended by SFAS No. 132 Employers Disclosures about Pensions and Other Post-Retirement Benefits.The Group has applied SFAS No. 87 and SFAS No.132
in preparing its US GAAP information.

The impact of these pronouncements has been included in the US GAAP reconciliation in
respect of the main AIB pension plans. These plans make up approximately 95% of AIB Groups plans in terms of assets and actuarial liabilities.

The components of total pension expense for the main AIB pension plan which arise under SFAS No. 87 are estimated to be as follows:



|                               |  |                          |   |  |      |  
|------------------------------ |  | ------------------------ | - |  | ---- | -
|                               |  | Years ended December 31, |  
|                               |  | 2005                     |   |  | 2004 |  
|                               |  | (Euro in millions)       |  
|Service cost                   |  | 97                       |   |  | 86   |  
|Interest cost                  |  | 161                      |   |  | 145  |  
|Expected return on plan assets |  | (173                     | ) |  | (164 | )
|Amortization of loss           |  | 81                       |   |  | 29   |  
|Other                          |  | 1                        |   |  | 4    |  
|                               |  |                          |   |  |      |  
|                               |  | 167                      |   |  | 100  |  
|                               |  |                          |   |  |      |  



An expected rate of
return of 6.5% on plan assets was used in determining the net periodic pension cost for the year ended December 31, 2005 (2004: 6.9%).

Actuarial assumptions used in determining the projected benefit obligation at December 31, 2005 included a discount rate in the range of 4.3% - 4.75% (2004: 4.9% - 5.3%), and an increase in future compensation expense of 4% (2004: 4%).



166



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following is a reconciliation of the beginning and ending balances of the benefit obligation, the
fair value of the plan assets and an analysis of the funded status of the plans for the years ended December 31, 2005 and 2004.



|                                               |  |                    |   |  |       |  
|---------------------------------------------- |  | ------------------ | - |  | ----- | -
|                                               |  | December 31,       |  
|                                               |  | 2005               |   |  | 2004  |  
|                                               |  | (Euro in millions) |  
|Change in benefit obligation                   |  |                    |   |  |       |  
|Benefit obligation at beginning of year        |  | 3,217              |   |  | 2,709 |  
|Service cost                                   |  | 97                 |   |  | 86    |  
|Prior service cost                             |  | 14                 |   |  |      |  
|Interest cost                                  |  | 161                |   |  | 145   |  
|Actuarial gain                                 |  | 674                |   |  | 355   |  
|Transfers from other Group schemes             |  | 34                 |   |  |      |  
|Currency translation adjustments               |  | 20                 |   |  | (3    | )
|Benefits paid                                  |  | (77                | ) |  | (75   | )
|                                               |  |                    |   |  |       |  
|Benefit obligation at end of year              |  | 4,140              |   |  | 3,217 |  
|                                               |  |                    |   |  |       |  
|                                               |  |                   
|Change in plan assets                          |  |                    |   |  |       |  
|Fair value of plan assets at beginning of year |  | 2,447              |   |  | 2,130 |  
|Employers contributions                       |  | 109                |   |  | 134   |  
|Actual return on plan assets                   |  | 516                |   |  | 260   |  
|Currency translation adjustments               |  | 12                 |   |  | (2    | )
|Fair value of plan assets transferred          |  | 25                 |   |  |      |  
|Benefits paid                                  |  | (77                | ) |  | (75   | )
|                                               |  |                    |   |  |       |  
|Fair value of plan assets at end of year       |  | 3,032              |   |  | 2,447 |  
|                                               |  |                    |   |  |       |  
|                                               | 
|                                               |  | December 31,       |  
|                                               |  | 2005               |   |  | 2004  |  
|                                               |  | (Euro in millions) |  
|Funded status                                  |  | (1,108             | ) |  | (770  | )
|Unrecognized transition obligation             |  | 47                 |   |  | 54    |  
|Unrecognized net loss                          |  | 1,328              |   |  | 1,095 |  
|Unrecognized prior service cost                |  | 13                 |   |  |      |  
|Unrecognized prior service credit              |  | (55                | ) |  | (62   | )
|                                               |  |                    |   |  |       |  
|Net amount recognized                          |  | 225                |   |  | 317   |  
|                                               |  |                    |   |  |       |  

The amounts recognized in the statement of financial position consist of:



|                                                                |  |     |   |  |    
|--------------------------------------------------------------- |  | --- | - |  | ---
|Prepaid pension cost                                            |  |    |   |  | 317
|Accrued benefit cost                                            |  | (79 | ) |  |   
|Intangible assets                                               |  | 60  |   |  |   
|Minimum liability adjustment - Other Comprehensive Income (OCI) |  | 244 |   |  |   
|                                                                |  |     |   |  |    
|Net amount recognized                                           |  | 225 |   |  | 317
|                                                                |  |     |   |  |    

There was a minimum liability at December 31, 2005 of 79 million, giving rise to a minimum liability
adjustment in Other Comprehensive Income of 171 million, net of tax.

The unrecognized prior service credit arose during the nine
months ended December 31, 1992 mainly as a result of changes in the terms of the plans, following the restructure of the main Irish and UK plans during 1991.

Plan assets

The long term asset allocation policy for the assets of the AIB Group Irish Pension Scheme (the Irish
Scheme), representing the bulk of defined pension assets and liabilities of the Group is as follows:



|                  |  |              |   |  |      |  
|----------------- |  | ------------ | - |  | ---- | -
|                  |  | December 31, |  
|                  |  | 2005         |   |  | 2004 |  
|Equities          |  | 63           | % |  | 65   | %
|Bonds             |  | 13           | % |  | 18   | %
|Property          |  | 10           | % |  | 14   | %
|Alternative funds |  | 14           | % |  | 3    | %

The investment manager has discretion to vary the asset allocation policy on a tactical basis. In
general, the asset allocation of the smaller defined benefit pension schemes operated by the Group will not differ significantly from that set out above. Further detail on the actual asset allocation and the long term rate of return expected is
detailed in Note 14  Retirement benefits.



167



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##### Table of Contents

ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Plan objectives

The Trustees long-term investment objectives are to:



| |  |  | Limit the risk of the assets failing to meet the liability of the Schemes over the long-term, and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Maximize returns consistent with an acceptable level of risk so as to control the long-term costs of the Defined Benefit Schemes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

The Trustees consider that the investment policy is consistent with meeting their overall long-term investment objectives. In pursuit of these long-term
objectives, the Trustees establish an overall benchmark for the allocation of the Defined Benefit Schemes assets between asset categories. In addition, each permitted asset class has its own benchmarks, such as the stock market or property
valuation indices and desired levels of performance where relevant. As the main defined benefit scheme (the Irish scheme) is a closed scheme, the asset allocation will be reviewed at least triennially, or more frequently if circumstances require it.
The process involves an extensive asset and liability review.

Benefits expected to be paid over each of the next five
years and in aggregate for the five years thereafter are:



|                               |  |                    |  |      |  |      |  |      |  |      |  |          
|------------------------------ |  | ------------------ |  | ---- |  | ---- |  | ---- |  | ---- |  | ---------
|                               |  | 2006               |  | 2007 |  | 2008 |  | 2009 |  | 2010 |  | 2011-2016
|                               |  | (Euro in millions)
|AIB Group Irish Pension Scheme |  | 66                 |  | 71   |  | 76   |  | 81   |  | 87   |  | 535      
|AIB Group UK Pension Scheme    |  | 11                 |  | 12   |  | 13   |  | 14   |  | 15   |  | 90       

For the year ended December 31,2006 AIB Group expects to contribute 65 million for the AIB
Group Irish Pension Scheme and 33 million for the AIB Group UK Pension Scheme.

Included in the pension assets of the AIB Group Irish
Pension Scheme at December 31, 2005 was an amount of 64 million in relation to investments in the ordinary share capital of Allied Irish Banks, p.l.c. (65 million at December 31, 2004).

Post-retirement benefits

Post-retirement benefit
liabilities are assessed actuarially on a similar basis to pension liabilities and are discounted at a long-term interest cost. Variations from regular cost are expressed as a percentage of payroll and are spread over the average remaining service
lives of current eligible employees.

Under SFAS No. 106 Employers Accounting for Post-Retirement Benefits other than
Pensions, there are certain differences in the actuarial method used and variations in the computation of regular cost as compared with IFRS. The disclosure requirements of SFAS No. 106 have been amended by SFAS No. 132
Employers Disclosures about Pensions and Other Post-Retirement Benefits.

The Group has applied SFAS No. 106 and SFAS
No. 132 in preparing its US GAAP information.

The following table shows the components of the net periodic post-retirement benefit cost for the
years ended December 31, 2005 and 2004.



|              |  |                          |  |     
|------------- |  | ------------------------ |  | ----
|              |  | Years ended December 31,
|              |  | 2005                     |  | 2004
|              |  | (Euro in millions)      
|Service cost  |  | 2                        |  | 1   
|Interest cost |  | 4                        |  | 1   
|              |  |                          |  |     
|              |  | 6                        |  | 2   
|              |  |                          |  |     



168



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The weighted average annual assumed rate of increase in the per capita cost of covered benefits is 6.5% for 2005 and
is assumed to decrease gradually to 5.0% in the year 2008 and will remain at that level thereafter. Increasing or decreasing the assumed health care cost trend rates by one percentage point in each future year would have an immaterial impact on
post-retirement benefits costs.

The following is a reconciliation of the beginning and ending balances of the benefit obligation and an
analysis of the funded status and the amounts recognized in the Groups consolidated statement of condition.



|                                        |  |                          |   |  |      |  
|--------------------------------------- |  | ------------------------ | - |  | ---- | -
|                                        |  | Years ended December 31, |  
|                                        |  | 2005                     |   |  | 2004 |  
|                                        |  | (Euro in millions)       |  
|Change in benefit obligation            |  |                          |  
|Benefit obligation at beginning of year |  | 23                       |   |  | 16   |  
|Service cost                            |  | 2                        |   |  | 1    |  
|Interest cost                           |  | 4                        |   |  | 1    |  
|Amendments                              |  | 35                       |   |  |     |  
|Actuarial loss                          |  | 23                       |   |  | 6    |  
|Benefits paid                           |  | (4                       | ) |  | (1   | )
|                                        |  |                          |   |  |      |  
|Benefit obligation at end of year       |  | 83                       |   |  | 23   |  
|                                        |  |                          |   |  |      |  
|Plan assets at fair value               |  |                         |   |  |     |  
|                                        |  |                          |   |  |      |  
|Funded status                           |  | (83                      | ) |  | (23  | )
|Unrecognized net loss                   |  | 23                       |   |  | 6    |  
|                                        |  |                          |   |  |      |  
|Accrued post-retirement benefit cost    |  | (60                      | ) |  | (17  | )
|                                        |  |                          |   |  |      |  

The assumptions used in developing the present value of the post-retirement
benefit obligation are as follows:



|              |  |                          |  |     
|------------- |  | ------------------------ |  | ----
|              |  | Years ended December 31,
|              |  | 2005                     |  | 2004
|Discount rate |  | 4.30                     |  | 4.90

Stock compensation plans

At December 31, 2005 the Group had three stock based compensation plans as outlined below. AIB has accounted for its stock based compensation plans under the provisions of Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees and related interpretations. Statement of Financial Accounting Standards 123, Accounting for Stock-Based Compensation (SFAS 123), allows a company to recognize
stock-based compensation using a fair-value based method of accounting if it so elects. AIB has elected not to adopt the recognition provisions of SFAS 123. The compensation cost charged against income for the Groups performance based plans
for the years ended December 31, 2005 and 2004 was 34 million and 25 million respectively.

For the purposes of
providing the pro forma disclosures required under SFAS 123, the fair values of stock options granted were estimated at the date of the grants using a binominal option pricing model for 2005 and Black Scholes model for 2004. The following table
presents the pro-forma net income and basic and diluted earnings per share that would have been recognized in the consolidated financial statements if the fair value method of accounting for stock options had been used for the years ended
December 31, 2005 and 2004.



|                                                                                             |  |                          |   |  |       |  
|-------------------------------------------------------------------------------------------- |  | ------------------------ | - |  | ----- | -
|                                                                                             |  | Years ended December 31, |  
|                                                                                             |  | 2005                     |   |  | 2004  |  
|                                                                                             |  | (Euro in millions)       |  
|Net income applicable to ordinary stockholders of AIB in accordance with US GAAP as reported |  | 928                      |   |  | 1,169 |  
|Stock based compensation expense under fair value method, net of tax                         |  | (22                      | ) |  | (20   | )
|                                                                                             |  |                          |   |  |       |  
|Pro-forma net income applicable to ordinary stockholders of AIB in accordance with US GAAP   |  | 906                      |   |  | 1,149 |  
|                                                                                             |  |                          |   |  |       |  
|Net income per American Depositary Share                                                     |  |                          |   |  |       |  
|Basic, as reported                                                                           |  | 2.23                     |   |  | 2.74  |  
|Basic, pro-forma                                                                             |  | 2.18                     |   |  | 2.70  |  
|Diluted, as reported                                                                         |  | 2.22                     |   |  | 2.73  |  
|Diluted, pro-forma                                                                           |  | 2.17                     |   |  | 2.69  |  



169



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



AIB Share option scheme

See note 13 to the consolidated financial statements.

Employee profit sharing schemes

See note 13 to the consolidated financial
statements.

Allfirst 1997 and 1999 Stock Option Plans

Allfirsts 1997 and 1999 Stock Option Plans provide for the grant to key employees of options to acquire AIB ADSs. The options are granted at no less than the fair market value of the ADSs at the date of the
grant. Options granted in 1998 through 2001, with the exception of options granted under the Allfirst Shares Plan, vest one half in 24 months and one half in 36 months from the grant date and must be exercized within 10 years of the grant date or
they will expire. Options granted on December 29, 1997 vested six months from the grant date and must be exercized within seven years of the grant date or they will expire. During 1999, Allfirst implemented an all employee stock option program
called Allfirst Shares which is part of the 1997 Stock Option Plan. Each full and part-time employee who was eligible for employee benefits and was employed by the Company as of May 4, 1999 received an option to purchase up to 100 AIB ADSs. The
options may be exercised: (i) any time after May 4, 2002 and before May 4, 2004, as long as the closing price of AIB ADSs has equalled or exceeded 150% of the exercise price for five consecutive days at any time after the grant date;
or (ii) any time after May 4, 2004, regardless of the price of the ADSs. The options must be exercized within 10 years or they will expire. Options under the 1999 Stock Option Plan vest based on certain performance criteria. During 2002,
2001 and 2000, options were granted under the 1997 Stock Option Plan, while options were granted under the 1999 Stock Option Plan in 2001 and 2000.

Allfirst and an independent Trustee created a trust, for the purpose of acquiring AIB ADSs in the open market with the proceeds of a loan from Allfirst. Generally, the Trust will acquire AIB ADSs in an amount equal to the number of stock
options granted at or about each grant date. Proceeds from option exercises and any dividends and other earnings on the trust assets will be used to repay the loan to the trust. Option holders have no preferential rights with respect to the trust
assets, and the trust assets are subject to the claims of Allfirsts general creditors in the event of insolvency. AIB will not issue any securities in connection with the 1997 or 1999 Stock Option Plan, will not receive any proceeds from the
exercise of the options, and otherwise has no rights or obligations with respect to the Stock Option Plans.

The 1999 Stock Option Plan was
transferred to M&T Bank Corporation on April 1, 2003 as part of its acquisition of Allfirst Financial Inc.

The 1997 Stock Option
Plan has been succeeded by the Allied Irish Bank 2003 Stock Option Plan, as discussed below.

Allied Irish Bank 2003 Stock Option Plan

The Allied Irish Banks p.l.c. 2003 Stock Option Plan constitutes a successor stock option plan with respect to the Allfirst Financial Inc. 1997 Stock
Option Plan for selected employees and officers of the Company and/or its Affiliates and selected Directors of its Affiliates.

The options
are granted at no less than fair market value of the ADRs on grant date. Options granted under this Plan vest one half on the second anniversary of the grant date, and the remaining half on the third anniversary of the grant date. The options
must be exercised within 10 years of the date of grant or they will expire. Any option transferred from the Allfirst Plan shall be exercisable as of the effective date in accordance with its terms.

The Company has created a Trust for the purpose of acquiring AIB ADRs on the open market and holding these ADRs for which Options are granted
under the Plan. ADRs representing not more than 25 million Ordinary Shares or such greater numbers as may be approved by the Board, may be purchased under the plan.

No options awards were granted from this plan in 2004 or 2005. See also note 46 to the consolidated financial statements.



170



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following summarizes option activity during 2005 and 2004.



|                                 |  |                   |   |                   |                               |       |            |       |   |                               |   |      
|-------------------------------- |  | ----------------- | - | ----------------- | ----------------------------- | ----- | ---------- | ----- | - | ----------------------------- | - | -----
|                                 |  | December 31, 2005 |   | December 31, 2004
|                                 |  | Number000        |   |                   | Weightedaverageexercise price |       | Number000 |       |   | Weightedaverageexercise price
|Outstanding at beginning of year |  | 608.2             |   |                   | $                             | 27.65 |            | 697.0 |   |                               | $ | 27.77
|Granted                          |  |                  |   |                   |                               |      |            |      |   |                               |   |     
|Exercized                        |  | (301.8            | ) |                   | $                             | 28.63 |            | (32.6 | ) |                               | $ | 28.60
|Forfeited                        |  | (1.2              | ) |                   | $                             | 28.60 |            | (56.2 | ) |                               | $ | 28.60
|                                 |  |                   |   |                   |                               |       |            |       |   |                               |   |      
|Outstanding at end of year       |  | 305.2             |   |                   | $                             | 26.56 |            | 608.2 |   |                               | $ | 27.65
|                                 |  |                   |   |                   |                               |       |            |       |   |                               |   |      



|(1) | Represent number of AIB ADSs.
|--- | -----------------------------

The following table summarizes information about fixed options outstanding at December 31, 2005:



|            |  |                                    |  |                                           |  |                                |       |                                    |       |                                |   |      
|----------- |  | ---------------------------------- |  | ----------------------------------------- |  | ------------------------------ | ----- | ---------------------------------- | ----- | ------------------------------ | - | -----
|            |  | Options outstanding                |  | Options exercisable                      
|            |  | Numberoutstanding at12/31/2005000 |  | Weighted averageremainingcontractual life |  | Weighted averageexercise price |       | Numberexercisable at12/31/2005000 |       | Weighted averageexercise price
|Grant date  |  |                                    |  |                                           |  |                                |       |                                    |       |                                |   |      
|8/14/00     |  | 35.0                               |  | 4.6 years                                 |  |                                | 17.72 |                                    | 35.0  |                                |   | 17.72
|2001 Grants |  | 35.0                               |  | 5.0 - 5.8 years                           |  |                                | 21.65 |                                    | 35.0  |                                |   | 21.65
|2002 Grants |  | 235.2                              |  | 6.3 - 6.9 years                           |  |                                | 28.60 |                                    | 235.2 |                                |   | 28.60
|            |  |                                    |  |                                           |  |                                |       |                                    |       |                                |   |      
|Total       |  | 305.2                              |  | 6.5 years                                 |  | $                              | 26.56 |                                    | 305.2 |                                | $ | 26.56
|            |  |                                    |  |                                           |  |                                |       |                                    |       |                                |   |      

For purposes of providing the pro-forma disclosures required under SFAS No.123, the fair values of
stock options granted in 2002 and 2001, were estimated at the date of the grants using a Black-Scholes option pricing model.

The
Black-Scholes option pricing model was originally developed for use in estimating the fair value of traded options which have different characteristics from the Allfirsts employee stock options. The model is also sensitive to changes in the
subjective assumptions which can materially affect the fair value estimate. As a result, management believes that the Black-Scholes model may not necessarily provide a reliable single measure of the fair value of employee stock options.

The following table details the weighted average assumptions used and the resulting fair values provided by the option pricing model:



|            |  |                             |   |  |                  |  |                        |   |  |              |  |                                      |     
|----------- |  | --------------------------- | - |  | ---------------- |  | ---------------------- | - |  | ------------ |  | ------------------------------------ | ----
|            |  | Expectedfuturedividendyield |   |  | Volatilityfactor |  | Risk freeinterest rate |   |  | Expectedlife |  | Fair valueper share ofoptionsgranted
|Grant date  |  |                             |   |  |                  |  |                        |   |  |              |  |                                      |     
|8/14/00     |  | 2.61                        | % |  | 0.3399           |  | 6.24                   | % |  | 5.5 years    |  | $                                    | 5.81
|2001 Grants |  | 3.02                        | % |  | 0.3704           |  | 5.29                   | % |  | 7 years      |  | $                                    | 7.47
|2002 Grants |  | 3.43                        | % |  | 0.3295           |  | 4.42                   | % |  | 10 years     |  | $                                    | 8.67

Impaired loans

SFAS 114 and 118 applies only to impaired loans, the measurement of which is based upon the present value of expected future cash flows discounted at the loans effective interest rate, the loans observable
market value, or the fair value of the collateral dependent.

Smaller balance homogeneous consumer loans that are collectively evaluated
for impairment are outside the scope of SFAS 114, as are debt securities and leases.

Reserves for probable credit losses related to these
loans are included in the allowance for credit losses applicable to other than impaired loans. The Groups charge off policy for impaired loans is consistent with its policy for loan charge offs to the allowance. Impaired loans are charged off
when an impaired loan, or portion thereof, is considered uncollectible. Interest income received on impaired loans is recorded on a cash basis, which is consistent with the Groups method of interest recognition on non-accrual loans.



171



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



At December 31, 2005 and 2004 the Group estimated that the difference between the carrying value
of its loan portfolio on the basis of SFAS No. 114 and 118 and its value in the Groups accounts was such that no adjustment to net income or consolidated ordinary stockholders equity was required.

At December 31, 2005, the Groups net investment in impaired loans amounts to 744 million (2004: 663 million). 683 million
(2004: 628 million) of this net investment included specific provisions of 458 million (2004: 333 million). The average level of such impaired lendings during 2005 was approximately 774 million (2004: 704 million).
Interest income recognized on impaired loans during the year ended December 31, 2005 amounted to 23 million (2004: 15 million).

Cash
flow statements

The consolidated cash flow statements on page 104 have been completed in accordance with IAS 7. The principal
difference between the standards relates to the classification of certain transactions as follows.

IAS 7 Cash and cash
equivalents defines cash as cash on hand and demand deposits, and cash equivalents as short-term, highly liquid investments that are readily available to known amounts of cash and which are subject to an insignificant risk of changes in value.
Whilst short-term is not defined, the standard suggests a cut off of three months or less from the date of acquisition of the investment, to ensure that investments held for investing activities are not included. The standard also allows
for the inclusion of bank overdrafts where they form an integral part of the companys cash management.



|                                                                              |  |                      |  |                     
|----------------------------------------------------------------------------- |  | -------------------- |  | --------------------
|                                                                              |  | Classification under
|                                                                              |  | IAS 7                |  | SFAS 95             
|                                                                              |  |                     
|Non-equity dividends paid                                                     |  | Financing activities |  | Financing activities
|                                                                              |  |                     
|Equity dividends paid                                                         |  | Financing activities |  | Financing activities
|                                                                              |  |                     
|Taxation paid                                                                 |  | Operating activities |  | Operating activities
|                                                                              |  |                     
|Net movement in lendings to customers                                         |  | Operating activities |  | Investing activities
|                                                                              |  |                     
|Net change in finance lease balances receivable                               |  | Operating activities |  | Investing activities
|                                                                              |  |                     
|Net increase in deposits                                                      |  | Operating activities |  | Financing activities
|                                                                              |  |                     
|Net movement in current and deposit accounts and other short-term liabilities |  | Operating activities |  | Financing activities



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|56. | FAIR VALUE OF FINANCIAL INSTRUMENTS
|--- | -----------------------------------

The term
financial instruments includes both financial assets and financial liabilities and also derivatives. The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arms length transaction.

Fair value is based upon quoted market prices where available. If a
quoted market price is not available, fair value is estimated using quoted market prices for similar instruments and adjusted for differences between the quoted instrument and the instrument being valued. In certain cases, including some lendings to
customers, where there are no ready markets, various techniques have been used to estimate the fair value of the instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore
cannot be determined with precision. Readers of these financial statements are advised to use caution when using the data to evaluate the Groups financial position or to make comparisons with other institutions.

Fair value information is not provided for certain financial instruments or for items that do not meet the definition of a financial instrument. These
items include short-term debtors and creditors, intangible assets such as the value of the branch network and the long-term relationships with depositors, premises and equipment and shareholders equity. These items are material and accordingly
the fair value information presented does not purport to represent, nor should it be construed to represent, the underlying value of the Group as a going concern at December 31, 2005.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following table gives details of the carrying amounts and fair values of financial instruments at
December 31, 2005 and 2004. As permitted by IFRS 1 First time adoption of International Financial Reporting Standards the carrying amount and fair value for 2004 are disclosed as previously reported in the 2004 Annual Report and on
Form 20-F.



|                                                       |  |                    |  |                   |  |                |  |           |  
|------------------------------------------------------ |  | ------------------ |  | ----------------- |  | -------------- |  | --------- | -
|                                                       |  | December 31, 2005  |  | December 31, 2004 | 
|                                                       |  | Carryingamount     |  | Fairvalue         |  | Carryingamount |  | Fairvalue |  
|                                                       |  | (Euro in millions) | 
|Assets                                                 |  |                    |  |                   |  |                |  |           |  
|Trading financial instruments(1)                       |  |                    |  |                   |  |                |  |           |  
|Trading portfolio financial assets                     |  | 10,113             |  | 10,113            |  |               |  |           |  
|Trading derivative financial instruments               |  | 1,849              |  | 1,849             |  |               |  |          |  
|Debt securities                                        |  |                   |  |                  |  | 7,826          |  | 7,826     |  
|Equity shares                                          |  |                   |  |                  |  | 84             |  | 84        |  
|Non-trading financial instruments                      |  |                    |  |                   |  |                |  |           |  
|Cash and balances at central banks(1)                  |  | 742                |  | 742               |  | 887            |  | 887       |  
|Treasury bills and other eligible bills                |  | 201                |  | 201               |  |               |  |          |  
|Items in course of collection(1)                       |  | 402                |  | 402               |  | 368            |  | 368       |  
|Loans and receivables to banks(2)                      |  | 7,129              |  | 7,129             |  | 2,320          |  | 2,336     |  
|Loans and receivables to customers(2)                  |  | 83,614             |  | 83,673            |  | 63,211         |  | 63,536    |  
|Financial investments available for sale               |  | 16,864             |  | 16,864            |  |               |  |          |  
|Hedging derivative financial instruments               |  | 590                |  | 590               |  |               |  |          |  
|Debt securities and equity shares                      |  |                   |  |                  |  | 16,361         |  | 16,633    |  
|Liabilities                                            |  |                    |  |                   |  |                |  |           |  
|Trading financial instruments                          |  |                    |  |                   |  |                |  |           |  
|Trading portfolio financial liabilities                |  | 240                |  | 240               |  |               |  |          |  
|Trading derivative financial instruments               |  | 1,779              |  | 1,779             |  |               |  |          |  
|Short positions in securities(1)                       |  |                   |  |                  |  | 332            |  | 332       |  
|Non-trading financial instruments                      |  |                    |  |                   |  |                |  |           |  
|Deposits by banks                                      |  | 29,329             |  | 29,328            |  | 20,428         |  | 20,447    |  
|Customer accounts                                      |  | 62,580             |  | 62,604            |  | 51,397         |  | 51,476    |  
|Debt securities in issue                               |  | 17,611             |  | 17,609            |  | 11,805         |  | 11,805    |  
|Hedging derivative financial instruments               |  | 188                |  | 188               |  |               |  |          |  
|Subordinated liabilities and other capital instruments |  | 3,756              |  | 3,859             |  | 2,766          |  | 2,882     |  
|Off-balance sheet assets/(liabilities)                 |  |                    |  |                   |  |                |  |           |  
|Trading financial instruments(1)                       |  |                    |  |                   |  |                |  |           |  
|Interest rate contracts                                |  |                   |  |                  |  | 152            |  | 152       |  
|Exchange rate contracts                                |  |                   |  |                  |  | 19             |  | 19        |  
|Equity contracts                                       |  |                   |  |                  |  | 70             |  | 70        |  
|Non-trading financial instruments                      |  |                    |  |                   |  |                |  |           |  
|Interest rate contracts                                |  |                   |  |                  |  | 48             |  | (12       | )



|(1) | The fair value of these financial instruments is equal to the carrying value. These instruments are either carried at market value, or have minimal credit losses and
are either short-term in nature or reprice frequently.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Finance leases with carrying amount totalling 1,618 million and 1,625 million at December 31, 2005 and 2004, respectively, are excluded. The fair
values of the finance leases were 1,617 million, and 1,612 million at December 31, 2005 and 2004 respectively. The carrying values are net of the allowances for loan losses and related unearned income.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The following methods and assumptions were used by the Group in estimating the fair value for its
financial instruments.

Trading portfolio financial assets/liabilities

Trading portfolio financial assets/liabilities are measured at fair value by reference to quoted market prices where available.

Loans and receivables to banks and loans and receivables to customers

The Group provides lending facilities of varying
rates and maturities to corporate and personal customers. Several different techniques are employed, as considered appropriate, in estimating the fair value of loans. Where secondary market prices were available, these were used. The carrying amount
of variable rate loans was considered to be at market value if there was no significant change in the credit risk of the borrower. The fair value of fixed rate loans was calculated by discounting expected cash flows using discount rates that
reflected the credit and interest rate risk in the portfolio.

The fair value of money market funds and loans and advances to banks was
estimated using discounted cash flows applying either market rates, where practicable, or rates currently offered by other financial institutions for placings with similar characteristics.

Financial investments available for sale

The fair
value of listed financial investments is based on market prices received from external pricing services or bid quotations received from external securities dealers. The estimated value of unlisted financial investments is based on the anticipated
future cashflows arising from these items.

Debt securities and equity shares

The fair value of listed debt securities and equity shares is based on market prices received from external pricing services or bid quotations received
from external securities dealers. The estimated value of unlisted debt securities and equity shares is based on the anticipated future cashflows arising from these items.

Deposits by banks, customer accounts and debt securities in issue

The fair value of current accounts
and deposit liabilities payable on demand is equal to their book value. The fair value of all other deposits and other borrowings is estimated using discounted cash flows applying either market rates, where applicable, or interest rates currently
offered by the Group.

Subordinated liabilities and other capital instruments

The estimated fair value of subordinated liabilities is based upon quoted market rates.

Commitments pertaining to credit-related instruments

Details of the various credit-related
commitments entered into by the Group and other off-balance sheet financial guarantees are included in note 48. Fees for these instruments may be billed in advance or in arrears on an annual, quarterly or monthly basis. In addition, the fees charged
vary on the basis of instrument type and associated credit risk. As a result it is not considered practicable to estimate the fair value of these instruments because each customer relationship would have to be separately evaluated.

Derivative financial instruments

Derivatives used
for trading purposes are marked to market using independent prices and are included the consolidated balance sheet at 31 December 2005 and 2004. The Group uses various derivatives, designated as hedges, to manage its exposure to fluctuations in
interest rates. The fair value of these instruments is estimated using market prices or pricing models consistent with the methods used for valuing similar instruments used for trading purposes. Derivatives classified as fair value or cash flow
hedges are included in the Balance Sheet at 31 December 2005 at fair value. In 2004, hedging derivatives were carried at amortised cost. Details of derivatives in place, including fair values, are included in note 49.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|57. | INTEREST RATE SENSITIVITY
|--- | -------------------------

The net interest rate
sensitivity of the Group at December 31, 2005 and 2004 is illustrated in the tables below. The tables set out details of those assets and liabilities whose values are subject to change as interest rates change within each repricing time period.
Details regarding assets and liabilities which are not sensitive to interest rate movements are also included.The tables show the sensitivity of the balance sheet at one point in time and are not necessarily indicative of positions at other dates.
In developing the classifications used in the tables it has been necessary to make certain assumptions and approximations in assigning assets and liabilities to different repricing categories.



|                                                                     |                    |                   |   |            |         |   |             |         |   |           |        |   |           |        |   |                     |         |   |         |        |   |       |        
|-------------------------------------------------------------------- | ------------------ | ----------------- | - | ---------- | ------- | - | ----------- | ------- | - | --------- | ------ | - | --------- | ------ | - | ------------------- | ------- | - | ------- | ------ | - | ----- | -------
|                                                                     |                    | December 31, 2005
|                                                                     | 0-3 Months         |                   |   | 3-6 Months |         |   | 6-12 Months |         |   | 1-5 Years |        |   | 5 + Years |        |   | Non-interestbearing |         |   | Trading |        |   | Total
|                                                                     | (Euro in millions)
|Assets                                                               |                    |                   |   |            |         |   |             |         |   |           |        |   |           |        |   |                     |         |   |         |        |   |       |        
|Treasury bills and other eligible bills                              |                    | 24                |   |            | 177     |   |             |        |   |           |       |   |           |       |   |                     |        |   |         |       |   |       | 201    
|Loans and receivables to banks                                       |                    | 5,947             |   |            | 72      |   |             | 222     |   |           |       |   |           |       |   |                     | 888     |   |         |       |   |       | 7,129  
|Trading portfolio financial assets                                   |                    |                  |   |            |        |   |             |        |   |           |       |   |           |       |   |                     |        |   |         | 10,113 |   |       | 10,113 
|Loans and receivables to customers                                   |                    | 69,956            |   |            | 2,523   |   |             | 2,274   |   |           | 7,169  |   |           | 2,716  |   |                     | 594     |   |         |       |   |       | 85,232 
|Financial investments available for sale                             |                    | 4,412             |   |            | 1,796   |   |             | 2,219   |   |           | 5,776  |   |           | 2,486  |   |                     | 175     |   |         |       |   |       | 16,864 
|Other assets                                                         |                    |                  |   |            |        |   |             |        |   |           |       |   |           |       |   |                     | 11,818  |   |         | 1,857  |   |       | 13,675 
|                                                                     |                    |                   |   |            |         |   |             |         |   |           |        |   |           |        |   |                     |         |   |         |        |   |       |        
|Total assets                                                         |                    | 80,339            |   |            | 4,568   |   |             | 4,715   |   |           | 12,945 |   |           | 5,202  |   |                     | 13,475  |   |         | 11,970 |   |       | 133,214
|                                                                     |                    |                   |   |            |         |   |             |         |   |           |        |   |           |        |   |                     |         |   |         |        |   |       |        
|Liabilities                                                          |                    |                   |   |            |         |   |             |         |   |           |        |   |           |        |   |                     |         |   |         |        |   |       |        
|Deposits by banks                                                    |                    | 26,728            |   |            | 1,103   |   |             | 1,207   |   |           | 78     |   |           |       |   |                     | 213     |   |         |       |   |       | 29,329 
|Trading portfolio financial liabilities                              |                    |                  |   |            |        |   |             |        |   |           |       |   |           |       |   |                     |        |   |         | 240    |   |       | 240    
|Customer accounts                                                    |                    | 47,653            |   |            | 1,708   |   |             | 1,622   |   |           | 1,638  |   |           | 74     |   |                     | 9,885   |   |         |       |   |       | 62,580 
|Debt securities in issue                                             |                    | 14,479            |   |            | 984     |   |             | 1,814   |   |           | 334    |   |           |       |   |                     |        |   |         |       |   |       | 17,611 
|Subordinated liabilities and other capital instruments               |                    | 1,149             |   |            | 85      |   |             |        |   |           |       |   |           | 2,522  |   |                     |        |   |         |       |   |       | 3,756  
|Other liabilities                                                    |                    |                  |   |            |        |   |             |        |   |           |       |   |           |       |   |                     | 10,829  |   |         | 1,700  |   |       | 12,529 
|Stockholders equity                                                 |                    |                  |   |            |        |   |             |        |   |           |       |   |           |       |   |                     | 7,169   |   |         |       |   |       | 7,169  
|                                                                     |                    |                   |   |            |         |   |             |         |   |           |        |   |           |        |   |                     |         |   |         |        |   |       |        
|Total liabilities                                                    |                    | 90,009            |   |            | 3,880   |   |             | 4,643   |   |           | 2,050  |   |           | 2,596  |   |                     | 28,096  |   |         | 1,940  |   |       | 133,214
|Derivative financial instruments affecting interest rate sensitivity |                    | 9,327             |   |            | (1,785  | ) |             | (3,423  | ) |           | (112   | ) |           | (4,007 | ) |                     |        |   |         |       |   |       |       
|                                                                     |                    |                   |   |            |         |   |             |         |   |           |        |   |           |        |   |                     |         |   |         |        |   |       |        
|                                                                     |                    | 99,336            |   |            | 2,095   |   |             | 1,220   |   |           | 1,938  |   |           | (1,411 | ) |                     | 28,096  |   |         | 1,940  |   |       | 133,214
|                                                                     |                    |                   |   |            |         |   |             |         |   |           |        |   |           |        |   |                     |         |   |         |        |   |       |        
|Interest sensitivity gap                                             |                    | (18,997           | ) |            | 2,473   |   |             | 3,495   |   |           | 11,007 |   |           | 6,613  |   |                     | (14,621 | ) |         | 10,030 |   |       |        
|Cumulative interest sensitivity gap                                  |                    | (18,997           | ) |            | (16,524 | ) |             | (13,029 | ) |           | (2,022 | ) |           | 4,591  |   |                     | (10,030 | ) |         |       |   |       |        
|                                                                     |                    |                   |   |            |         |   |             |        
|                                                                     |                    | Euro m            |   |            | Euro m  |   |             | Euro m  |   |           | Euro m |   |           | Euro m |   |                     | Euro m  |   |         | Euro m |   |       |        
|Interest sensitivity gap                                             |                    | (8,234            | ) |            | 959     |   |             | 2,607   |   |           | 6,764  |   |           | 4,683  |   |                     | (12,620 | ) |         | 4,816  |   |       |        
|Cumulative interest sensitivity gap                                  |                    | (8,234            | ) |            | (7,275  | ) |             | (4,668  | ) |           | 2,096  |   |           | 6,779  |   |                     | (5,841  | ) |         | (1,025 | ) |       |        
|                                                                     |                    |                   |   |            |         |   |             |        
|                                                                     |                    | US $m             |   |            | US $m   |   |             | US $m   |   |           | US $m  |   |           | US $m  |   |                     | US $m   |   |         | US $m  |   |       |        
|Interest sensitivity gap                                             |                    | (6,338            | ) |            | 909     |   |             | 575     |   |           | 2,107  |   |           | 433    |   |                     | 2,064   |   |         | 1,702  |   |       |        
|Cumulative interest sensitivity gap                                  |                    | (6,338            | ) |            | (5,429  | ) |             | (4,854  | ) |           | (2,747 | ) |           | (2,314 | ) |                     | (250    | ) |         | 1,452  |   |       |        
|                                                                     |                    |                   |   |            |         |   |             |        
|                                                                     |                    | Stg m             |   |            | Stg m   |   |             | Stg m   |   |           | Stg m  |   |           | Stg m  |   |                     | Stg m   |   |         | Stg m  |   |       |        
|Interest sensitivity gap                                             |                    | (1,344            | ) |            | 214     |   |             | 51      |   |           | 1,789  |   |           | 1,441  |   |                     | (3,590  | ) |         | 1,417  |   |       |        
|Cumulative interest sensitivity gap                                  |                    | (1,344            | ) |            | (1,130  | ) |             | (1,079  | ) |           | 710    |   |           | 2,151  |   |                     | (1,439  | ) |         | (22    | ) |       |        
|                                                                     |                    |                   |   |            |         |   |             |        
|                                                                     |                    | PLN m             |   |            | PLN m   |   |             | PLN m   |   |           | PLN m  |   |           | PLN m  |   |                     | PLN m   |   |         | PLN m  |   |       |        
|Interest sensitivity gap                                             |                    | (1,652            | ) |            | 588     |   |             | 250     |   |           | 228    |   |           |       |   |                     | (503    | ) |         | 573    |   |       |        
|Cumulative interest sensitivity gap                                  |                    | (1,652            | ) |            | (1,064  | ) |             | (814    | ) |           | (586   | ) |           | (586   | ) |                     | (1,089  | ) |         | (516   | ) |       |        



176



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



As permitted by IFRS 1 First time adoption of International Financial Reporting Standards the following
interest rate sensitivity table for 2004 is disclosed as previously reported in the 2004 Annual Report and Accounts.



|                                                            |                    |                   |   |            |        |   |             |        |   |           |        |   |           |        |   |                      |         |   |         |        |   |       |        
|----------------------------------------------------------- | ------------------ | ----------------- | - | ---------- | ------ | - | ----------- | ------ | - | --------- | ------ | - | --------- | ------ | - | -------------------- | ------- | - | ------- | ------ | - | ----- | -------
|                                                            |                    | December 31, 2004
|                                                            | 0-3 Months         |                   |   | 3-6 Months |        |   | 6-12 Months |        |   | 1-5 Years |        |   | 5 years + |        |   | Non- interestbearing |         |   | Trading |        |   | Total
|                                                            | (Euro in millions)
|Assets                                                      |                    |                   |   |            |        |   |             |        |   |           |        |   |           |        |   |                      |         |   |         |        |   |       |        
|Loans and advances to banks                                 |                    | 1,251             |   |            | 186    |   |             | 85     |   |           |       |   |           |       |   |                      | 798     |   |         |       |   |       | 2,320  
|Loans and advances to customers                             |                    | 54,984            |   |            | 2,184  |   |             | 1,683  |   |           | 3,456  |   |           | 2,529  |   |                      |        |   |         |       |   |       | 64,836 
|Debt securities                                             |                    | 3,687             |   |            | 898    |   |             | 1,344  |   |           | 6,806  |   |           | 3,515  |   |                      |        |   |         | 7,826  |   |       | 24,076 
|Other assets                                                |                    |                  |   |            |       |   |             |       |   |           |       |   |           |       |   |                      | 10,102  |   |         | 906    |   |       | 11,008 
|                                                            |                    |                   |   |            |        |   |             |        |   |           |        |   |           |        |   |                      |         |   |         |        |   |       |        
|Total assets                                                |                    | 59,922            |   |            | 3,268  |   |             | 3,112  |   |           | 10,262 |   |           | 6,044  |   |                      | 10,900  |   |         | 8,732  |   |       | 102,240
|                                                            |                    |                   |   |            |        |   |             |        |   |           |        |   |           |        |   |                      |         |   |         |        |   |       |        
|Liabilities                                                 |                    |                   |   |            |        |   |             |        |   |           |        |   |           |        |   |                      |         |   |         |        |   |       |        
|Deposits by banks                                           |                    | 13,716            |   |            | 3,360  |   |             | 3,086  |   |           |       |   |           | 183    |   |                      | 83      |   |         |       |   |       | 20,428 
|Customer accounts                                           |                    | 37,253            |   |            | 1,275  |   |             | 1,100  |   |           | 2,662  |   |           | 226    |   |                      | 8,881   |   |         |       |   |       | 51,397 
|Debt securities in issue                                    |                    | 9,501             |   |            | 1,087  |   |             | 1,068  |   |           | 149    |   |           |       |   |                      |        |   |         |       |   |       | 11,805 
|Subordinated liabilities                                    |                    | 1,500             |   |            | 73     |   |             |       |   |           |       |   |           | 1,192  |   |                      |        |   |         |       |   |       | 2,765  
|Other liabilities                                           |                    |                  |   |            |       |   |             |       |   |           |       |   |           |       |   |                      | 9,053   |   |         | 1,211  |   |       | 10,264 
|Stockholders equity                                        |                    |                  |   |            |       |   |             |       |   |           |       |   |           |       |   |                      | 5,581   |   |         |       |   |       | 5,581  
|                                                            |                    |                   |   |            |        |   |             |        |   |           |        |   |           |        |   |                      |         |   |         |        |   |       |        
|Total liabilities                                           |                    | 61,970            |   |            | 5,795  |   |             | 5,254  |   |           | 2,811  |   |           | 1,601  |   |                      | 23,598  |   |         | 1,211  |   |       | 102,240
|Off-balance sheet items affecting interest rate sensitivity |                    | 5,131             |   |            | (4,560 | ) |             | (1,835 | ) |           | 1,933  |   |           | (669   | ) |                      |        |   |         |       |   |       |       
|                                                            |                    |                   |   |            |        |   |             |        |   |           |        |   |           |        |   |                      |         |   |         |        |   |       |        
|                                                            |                    | 67,101            |   |            | 1,235  |   |             | 3,419  |   |           | 4,744  |   |           | 932    |   |                      | 23,598  |   |         | 1,211  |   |       | 102,240
|                                                            |                    |                   |   |            |        |   |             |        |   |           |        |   |           |        |   |                      |         |   |         |        |   |       |        
|Interest sensitivity gap                                    |                    | (7,179            | ) |            | 2,033  |   |             | (307   | ) |           | 5,518  |   |           | 5,112  |   |                      | (12,698 | ) |         | 7,521  |   |       |        
|Cumulative interest sensitivity gap                         |                    | (7,179            | ) |            | (5,146 | ) |             | (5,453 | ) |           | 65     |   |           | 5,177  |   |                      | (7,521  | ) |         |       |   |       |        
|                                                            |                    |                   |   |            |        |   |             |       
|                                                            |                    | Euro m            |   |            | Euro m |   |             | Euro m |   |           | Euro m |   |           | Euro m |   |                      | Euro m  |   |         | Euro m |   |       |        
|Interest sensitivity gap                                    |                    | (960              | ) |            | 2,313  |   |             | 102    |   |           | 2,676  |   |           | 3,222  |   |                      | (11,149 | ) |         | 3,675  |   |       |        
|Cumulative interest sensitivity gap                         |                    | (960              | ) |            | 1,353  |   |             | 1,455  |   |           | 4,131  |   |           | 7,353  |   |                      | (3,796  | ) |         | (121   | ) |       |        
|                                                            |                    |                   |   |            |        |   |             |       
|                                                            |                    | US $m             |   |            | US $m  |   |             | US $m  |   |           | US $m  |   |           | US $m  |   |                      | US $m   |   |         | US $m  |   |       |        
|Interest sensitivity gap                                    |                    | (4,087            | ) |            | 147    |   |             | 198    |   |           | 458    |   |           | 341    |   |                      | 2,195   |   |         | 1,122  |   |       |        
|Cumulative interest sensitivity gap                         |                    | (4,087            | ) |            | (3,940 | ) |             | (3,742 | ) |           | (3,284 | ) |           | (2,943 | ) |                      | (748    | ) |         | 374    |   |       |        
|                                                            |                    |                   |   |            |        |   |             |       
|                                                            |                    | Stg m             |   |            | Stg m  |   |             | Stg m  |   |           | Stg m  |   |           | Stg m  |   |                      | Stg m   |   |         | Stg m  |   |       |        
|Interest sensitivity gap                                    |                    | (615              | ) |            | 88     |   |             | (590   | ) |           | 1,713  |   |           | 1,411  |   |                      | (3,463  | ) |         | 1,392  |   |       |        
|Cumulative interest sensitivity gap                         |                    | (615              | ) |            | (527   | ) |             | (1,117 | ) |           | 596    |   |           | 2,007  |   |                      | (1,456  | ) |         | (64    | ) |       |        
|                                                            |                    |                   |   |            |        |   |             |       
|                                                            |                    | PLN m             |   |            | PLN m  |   |             | PLN m  |   |           | PLN m  |   |           | PLN m  |   |                      | PLN m   |   |         | PLN m  |   |       |        
|Interest sensitivity gap                                    |                    | (1,267            | ) |            | (98    | ) |             | (26    | ) |           | 510    |   |           | 116    |   |                      | 187     |   |         | 345    |   |       |        
|Cumulative interest sensitivity gap                         |                    | (1,267            | ) |            | (1,365 | ) |             | (1,391 | ) |           | (881   | ) |           | (765   | ) |                      | (578    | ) |         | (233   | ) |       |        



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|58. | FRAUDULENT FOREIGN EXCHANGE TRADING ACTIVITIES
|--- | ----------------------------------------------

On
February 6, 2002, Allied Irish Banks, p.l.c. (AIB) announced that it was undertaking a full investigation into fraudulent foreign exchange (FX) trading operations at its US subsidiary Allfirst Bank. The Board appointed
Mr. Eugene A Ludwig, Managing Partner, Promontory Financial Group, and a former U.S. Comptroller of the Currency, to report on these matters to the board of directors. The board also appointed Mr. Edward D Herlihy and his law firm
Wachtell, Lipton, Rosen & Katz to report to the board and provide legal advice on the basis of the investigation. The losses arising from the fraudulent FX trading activities were publicly disclosed by AIB in its preliminary announcement of
results on February 20, 2002. Such losses amounted to US$691.2 million before taxation and related to years from 1997 to 2002.

In
accordance with Irish GAAP the total costs arising from the Fraud were reflected by way of an exceptional charge of 789 million (of which 341 million related to prior periods) in the profit and loss account in the Annual Report and
Accounts for the year ended December 31, 2001, distributed to stockholders under Irish Companies Legislation (Irish Legislation Annual Report and Accounts). Under Financial Reporting Standard 3 Reporting Financial
Performance (FRS 3) prior period financial statements are restated for an error only if the error is a fundamental error. Fundamental errors under FRS 3 are errors that are of such significance as to destroy the true and fair view
and hence the validity of the prior period financial statements. In the opinion of the Directors, the exceptional foreign exchange losses, relating to each of the prior years, did not constitute fundamental errors, because they were not of such
significance as to destroy the true and fair view and hence the validity of the prior period financial statements. As restatement of errors in accounts under Irish GAAP is limited to fundamental errors, these losses were not reflected in prior
periods in the Irish Legislation Annual Report and Accounts.

Under US reporting requirements, the filing of the 2001 financial statements
by way of Annual Report on Form 20-F constituted a reissue of the financial statements for prior years. For the purpose of presenting the Balance Sheet and Statement of Income of the Group in the Form 20-F, the US Securities and Exchange Commission
requires all material errors relating to prior periods to be accounted for and reported as prior year adjustments. Accordingly, the financial statements prepared for inclusion in the Annual Report on Form 20-F were restated to reflect the losses
arising from the Fraud in the periods in which they occurred.

The following terms are used to describe the losses arising from the
fraudulent foreign exchange trading activities and other commonly used descriptions throughout the Financial Statements and notes thereto.



|                                                 |  |   |  |                                              
|------------------------------------------------ |  | - |  | ---------------------------------------------
| Fraudulent foreign exchange trading activities |  | = |  | Fraudulent Activities or Fraud           
| Losses arising from fraudulent foreign         |  | = |  | Fraud Losses or                            
|exchange trading activities                      |  |   |  | Exceptional Foreign Exchange Dealing Losses
| Foreign Exchange                               |  | = |  | FX                                         

The euro amount of the losses reported under US reporting requirements in the years 1997 to 2002
does not equate to the charge of 789 million under Irish GAAP for the year ended December 31, 2001. This arises for a number of reasons. In the Irish GAAP accounts the total fraud losses, US$691.2 million, and costs estimated at US$10
million less the reversal of an incentive accrual of US$6 million were charged as an exceptional item in 2001 at the exchange rate prevailing on December 31, 2001.

Under US reporting requirements the Fraud Losses were charged in each of the years they arose, translated at the average rates of exchange used in the preparation of the accounts for those years. The Fraud Losses
arising in 2002, including the costs of closing out the transactions, of US$17.2 million and administration expenses of US$10 million are reflected in the Consolidated Statement of Income for the year ended December 31, 2002 in this Annual
Report on Form 20-F. The additional administration expenses of US$10 million are those arising from the investigation and the consequent measures taken to strengthen controls.

The following table reflects the reconciliation of the net income attributable to ordinary stockholders, as reported in the Annual Report on Form 20-F to the amounts in the Irish Legislation Annual Report and
Accounts, for the year ended December 31, 2002.



|                                                     |  |                    |  
|---------------------------------------------------- |  | ------------------ | -
|                                                     |  | December 31,2002   |  
|                                                     |  | (Euro in millions) |  
|Net income attributable to the ordinary stockholders |  |                    |  
|Per Irish Legislation Annual Report and Accounts     |  | 1,034              |  
|Adjustments                                          |  |                    |  
|Exceptional losses                                   |  | (18                | )
|Administration expenses                              |  | (10                | )
|Taxation                                             |  | 10                 |  
|                                                     |  |                    |  
|Per Annual Report on Form 20-F                       |  | 1,016              |  
|                                                     |  |                    |  



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|59. | RECONCILIATIONS OF IRISH GAAP TO IFRS
|--- | -------------------------------------

As stated in
First time adoption of International Financial Reporting Standards (IFRS) and in Note 1 to the consolidated financial statements, these are the Groups first Financial Statements prepared in accordance with IFRS.

In order to prepare the IFRS opening balance sheet, it was necessary to adjust the amounts reported in the Financial Statements prepared in accordance
with Irish GAAP to reflect the application of the International Financial Reporting Standards.

Reconciliations of the transition from
Irish GAAP to IFRS are set out below, and explain how the transition has affected the financial position and performance of the Group.

The
balance sheet reconciliations present the restatement of the Group balance sheets at December 31, 2004 from Irish GAAP to IFRS including the impacts of IAS 32, IAS 39 and IFRS 4 at January 1, 2005.

The Income statement reconciliation presents for the Group the restatement from Irish GAAP Profit and Loss account to IFRS Income statement for the year
ended December 31, 2004.

Reconciliations between Irish GAAP and IFRS are summarized in note 1 of stockholders equity at
December 31, 2004 before the implementation of IAS 32, IAS 39 and IFRS 4 and at January 1, 2005 following the implementation of IAS 32, IAS 39 and IFRS 4.

Additionally, detailed explanations of the key differences between Irish GAAP and IFRS impacting the Groups financial statements are set out in this note.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



Consolidated balance sheets



|                                                                 |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|---------------------------------------------------------------- |  | ---------------------------------- |  | ----------------------------------- |  | ----------------- | - |  |  |  | -------- | - |  |  |  | ------- |  |  |  | ----------------- | - |  |  |  | -------- | - |  |  |  | -------
|                                                                 |  | December 31, 2004 IFRS adjustments |  | January 1, 2005 IAS 32, 39 & IFRS 4
|                                                                 |  | IrishGAAP                          |  |                                     |  | Reclassi-fication |   |  |  |  | Toequity |   |  |  |  | IFRS    |  |  |  | Reclassi-fication |   |  |  |  | Toequity |   |  |  |  | IFRS   
|                                                                 |  | (Euro in millions)                
|Assets                                                           |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|Cash and balances at central banks                               |  | 887                                |  |                                     |  |                  |   |  |  |  |         |   |  |  |  | 887     |  |  |  |                  |   |  |  |  |         |   |  |  |  | 887    
|Items in course of collection                                    |  | 368                                |  |                                     |  |                  |   |  |  |  |         |   |  |  |  | 368     |  |  |  |                  |   |  |  |  |         |   |  |  |  | 368    
|Trading portfolio financial assets                               |  |                                   |  |                                     |  |                  |   |  |  |  |         |   |  |  |  |        |  |  |  | 7,957             |   |  |  |  |         |   |  |  |  | 7,957  
|Financial assets designated at fair value through profit or loss |  |                                   |  |                                     |  |                  |   |  |  |  |         |   |  |  |  |        |  |  |  | 1,871             |   |  |  |  |         |   |  |  |  | 1,871  
|Derivative financial instruments                                 |  |                                   |  |                                     |  |                  |   |  |  |  |         |   |  |  |  |        |  |  |  | 2,419             |   |  |  |  | 162      |   |  |  |  | 2,581  
|Loans and receivables to banks                                   |  | 2,320                              |  |                                     |  | 220               |   |  |  |  |         |   |  |  |  | 2,540   |  |  |  | (2                | ) |  |  |  |         |   |  |  |  | 2,538  
|Loans and receivables to customers                               |  | 64,836                             |  |                                     |  | (98               | ) |  |  |  |         |   |  |  |  | 64,738  |  |  |  | 894               |   |  |  |  | 60       |   |  |  |  | 65,692 
|Financial investments available for sale                         |  |                                   |  |                                     |  |                  |   |  |  |  |         |   |  |  |  |        |  |  |  | 15,397            |   |  |  |  | 323      |   |  |  |  | 15,720 
|Debt securities and equity shares                                |  | 24,271                             |  |                                     |  | 1,871             |   |  |  |  |         |   |  |  |  | 26,142  |  |  |  | (26,142           | ) |  |  |  |         |   |  |  |  |       
|Interests in associated undertakings                             |  | 1,317                              |  |                                     |  |                  |   |  |  |  | 62       |   |  |  |  | 1,379   |  |  |  | (1                | ) |  |  |  | 17       |   |  |  |  | 1,395  
|Intangible assets and goodwill                                   |  | 380                                |  |                                     |  | 109               |   |  |  |  | 51       |   |  |  |  | 540     |  |  |  |                  |   |  |  |  |         |   |  |  |  | 540    
|Property, plant and equipment                                    |  | 785                                |  |                                     |  | (40               | ) |  |  |  |         |   |  |  |  | 745     |  |  |  |                  |   |  |  |  |         |   |  |  |  | 745    
|Other assets                                                     |  | 2,247                              |  |                                     |  | 350               |   |  |  |  |         |   |  |  |  | 2,597   |  |  |  | (963              | ) |  |  |  | (199     | ) |  |  |  | 1,435  
|Current taxation                                                 |  |                                   |  |                                     |  | 25                |   |  |  |  |         |   |  |  |  | 25      |  |  |  |                  |   |  |  |  |          |   |  |  |  | 25     
|Deferred taxation                                                |  | 198                                |  |                                     |  | 23                |   |  |  |  | 7        |   |  |  |  | 228     |  |  |  |                  |   |  |  |  | (24      | ) |  |  |  | 204    
|Prepayments and accrued income                                   |  | 918                                |  |                                     |  |                  |   |  |  |  | 2        |   |  |  |  | 920     |  |  |  |                  |   |  |  |  | (59      | ) |  |  |  | 861    
|Long-term assurance business attributable to shareholders        |  | 467                                |  |                                     |  | (467              | ) |  |  |  |         |   |  |  |  |        |  |  |  |                  |   |  |  |  |         |   |  |  |  |       
|Long-term assurance business attributable to policyholders       |  | 3,246                              |  |                                     |  | (3,246            | ) |  |  |  |         |   |  |  |  |        |  |  |  |                  |   |  |  |  |         |   |  |  |  |       
|                                                                 |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|Total assets                                                     |  | 102,240                            |  |                                     |  | (1,253            | ) |  |  |  | 122      |   |  |  |  | 101,109 |  |  |  | 1,430             |   |  |  |  | 280      |   |  |  |  | 102,819
|                                                                 |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|Liabilities                                                      |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|Deposits by banks                                                |  | 20,428                             |  |                                     |  |                  |   |  |  |  |         |   |  |  |  | 20,428  |  |  |  |                  |   |  |  |  |         |   |  |  |  | 20,428 
|Customer accounts                                                |  | 51,397                             |  |                                     |  | (1,246            | ) |  |  |  |         |   |  |  |  | 50,151  |  |  |  |                  |   |  |  |  |         |   |  |  |  | 50,151 
|Trading portfolio financial liabilities                          |  |                                   |  |                                     |  |                  |   |  |  |  |         |   |  |  |  |        |  |  |  | 332               |   |  |  |  |         |   |  |  |  | 332    
|Derivative financial instruments                                 |  |                                   |  |                                     |  |                  |   |  |  |  |         |   |  |  |  |        |  |  |  | 2,318             |   |  |  |  | 223      |   |  |  |  | 2,541  
|Investment and insurance contract liabilities                    |  |                                   |  |                                     |  | 3,286             |   |  |  |  |         |   |  |  |  | 3,286   |  |  |  | 601               |   |  |  |  |         |   |  |  |  | 3,887  
|Debt securities in issue                                         |  | 11,805                             |  |                                     |  |                  |   |  |  |  |         |   |  |  |  | 11,805  |  |  |  |                  |   |  |  |  |         |   |  |  |  | 11,805 
|Current taxation                                                 |  |                                   |  |                                     |  | 175               |   |  |  |  |         |   |  |  |  | 175     |  |  |  |                  |   |  |  |  | 22       |   |  |  |  | 197    
|Other liabilities                                                |  | 3,899                              |  |                                     |  | (184              | ) |  |  |  | (328     | ) |  |  |  | 3,387   |  |  |  | (1,794            | ) |  |  |  |         |   |  |  |  | 1,593  
|Accruals and deferred income                                     |  | 911                                |  |                                     |  |                  |   |  |  |  | 2        |   |  |  |  | 913     |  |  |  | (27               | ) |  |  |  | (181     | ) |  |  |  | 705    
|Retirement benefit liabilities                                   |  | 676                                |  |                                     |  | 187               |   |  |  |  | 23       |   |  |  |  | 886     |  |  |  |                  |   |  |  |  |         |   |  |  |  | 886    
|Provisions for liabilities and charges                           |  | 122                                |  |                                     |  |                  |   |  |  |  |         |   |  |  |  | 122     |  |  |  |                  |   |  |  |  |         |   |  |  |  | 122    
|Deferred taxation                                                |  | 123                                |  |                                     |  | (151              | ) |  |  |  | 80       |   |  |  |  | 52      |  |  |  |                  |   |  |  |  | (14      | ) |  |  |  | 38     
|Subordinated liabilities and other capital instruments           |  | 2,766                              |  |                                     |  |                  |   |  |  |  |         |   |  |  |  | 2,766   |  |  |  |                  |   |  |  |  | (315     | ) |  |  |  | 2,451  
|Long-term assurance business attributable to policyholders       |  | 3,320                              |  |                                     |  | (3,320            | ) |  |  |  |         |   |  |  |  |        |  |  |  |                  |   |  |  |  |         |   |  |  |  |       
|                                                                 |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|Total liabilities                                                |  | 95,447                             |  |                                     |  | (1,253            | ) |  |  |  | (223     | ) |  |  |  | 93,971  |  |  |  | 1,430             |   |  |  |  | (265     | ) |  |  |  | 95,136 
|                                                                 |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|Stockholders equity                                             |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|Issued share capital                                             |  | 294                                |  |                                     |  |                  |   |  |  |  |         |   |  |  |  | 294     |  |  |  |                  |   |  |  |  |         |   |  |  |  | 294    
|Share premium account                                            |  | 1,693                              |  |                                     |  |                  |   |  |  |  |         |   |  |  |  | 1,693   |  |  |  |                  |   |  |  |  |         |   |  |  |  | 1,693  
|Other equity interests                                           |  | 182                                |  |                                     |  |                  |   |  |  |  |         |   |  |  |  | 182     |  |  |  |                  |   |  |  |  | 315      |   |  |  |  | 497    
|Reserves                                                         |  | 977                                |  |                                     |  |                  |   |  |  |  | 8        |   |  |  |  | 985     |  |  |  |                  |   |  |  |  | 205      |   |  |  |  | 1,190  
|Profit and loss account                                          |  | 2,435                              |  |                                     |  |                  |   |  |  |  | 338      |   |  |  |  | 2,773   |  |  |  |                  |   |  |  |  | 25       |   |  |  |  | 2,798  
|Stockholders equity                                             |  | 5,581                              |  |                                     |  |                  |   |  |  |  | 346      |   |  |  |  | 5,927   |  |  |  |                  |   |  |  |  | 545      |   |  |  |  | 6,472  
|Minority interests                                               |  | 1,212                              |  |                                     |  |                  |   |  |  |  | (1       | ) |  |  |  | 1,211   |  |  |  |                  |   |  |  |  |         |   |  |  |  | 1,211  
|                                                                 |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|Stockholders equity (including minority interests)              |  | 6,793                              |  |                                     |  |                  |   |  |  |  | 345      |   |  |  |  | 7,138   |  |  |  |                  |   |  |  |  | 545      |   |  |  |  | 7,683  
|                                                                 |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        
|Total liabilities, stockholders equity and minority interests   |  | 102,240                            |  |                                     |  | (1,253            | ) |  |  |  | 122      |   |  |  |  | 101,109 |  |  |  | 1,430             |   |  |  |  | 280      |   |  |  |  | 102,819
|                                                                 |  |                                    |  |                                     |  |                   |   |  |  |  |          |   |  |  |  |         |  |  |  |                   |   |  |  |  |          |   |  |  |  |        



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



|                                                                  |  |                              |   |  |                  |   |  |                        |    
|----------------------------------------------------------------- |  | ---------------------------- | - |  | ---------------- | - |  | ---------------------- | ---
|                                                                  |  | December 31, 2004 Irish GAAP |   |  | IFRS adjustments |   |  | December 31, 2004 IFRS |    
|                                                                  |  | (Euro in millions)           |  
|Consolidated income statement                                     |  |                              |  
|Net interest income                                               |  | 2,036                        |   |  | 98               |   |  | 2,134                  |    
|Other finance income                                              |  | 18                           |   |  | (18              | ) |  |                       |    
|Other non-interest income                                         |  | 1,234                        |   |  | 264              |   |  | 1,498                  |    
|                                                                  |  |                              |   |  |                  |   |  |                        |    
|Total operating income                                            |  | 3,288                        |   |  | 344              |   |  | 3,632                  |    
|Insurance claims                                                  |  |                             |   |  | 309              |   |  | 309                    |    
|Operating expenses                                                |  | 1,886                        |   |  | 8                |   |  | 1,894                  |    
|                                                                  |  |                              |   |  |                  |   |  |                        |    
|Operating income before provisions                                |  | 1,402                        |   |  | 27               |   |  | 1,429                  |    
|Provisions                                                        |  | 135                          |   |  | (2               | ) |  | 133                    |    
|                                                                  |  |                              |   |  |                  |   |  |                        |    
|Operating income                                                  |  | 1,267                        |   |  | 29               |   |  | 1,296                  |    
|Share of results of associated undertakings                       |  | 201                          |   |  | (69              | ) |  | 132                    |    
|Amortization of goodwill on acquisition of associated undertaking |  | (52                          | ) |  | 52               |   |  |                       |    
|Gain on disposals                                                 |  | 26                           |   |  |                 |   |  | 26                     |    
|                                                                  |  |                              |   |  |                  |   |  |                        |    
|Income before taxes                                               |  | 1,442                        |   |  | 12               |   |  | 1,454                  |    
|Taxation                                                          |  | 339                          |   |  | (64              | ) |  | 275                    |    
|                                                                  |  |                              |   |  |                  |   |  |                        |    
|Income after taxes                                                |  | 1,103                        |   |  | 76               |   |  | 1,179                  | (1)
|Income attributable to minority interests                         |  | 30                           |   |  | (1               | ) |  | 29                     |    
|Dividends on non-equity shares                                    |  | 5                            |   |  | (1               | ) |  | 4                      |    
|                                                                  |  |                              |   |  |                  |   |  |                        |    
|Net income applicable to ordinary stockholders                    |  | 1,068                        |   |  | 78               |   |  | 1,146                  |    
|                                                                  |  |                              |   |  |                  |   |  |                        |    



|(1) | Reflects the December 31, 2004 IFRS income statement prior to the restatement to represent the results of Ark Life as a discontinued operation (note 2).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The key differences between Irish GAAP and IFRS impacting the Groups financial statements are
as follows:



|(a) | Basis of consolidation
|--- | ----------------------

In order to
reflect the different nature of the stockholders and policyholders interests in the long-term assurance business, these were classified under separate headings in the consolidated balance sheet under Irish GAAP.

Movements in the value of the long-term assurance business attributable to stockholders, were presented in the profit and loss account
grossed up at the statutory tax rate.

IAS 27 Consolidated and separate financial statements requires that all
entities are consolidated on a line by line basis, except in very limited circumstances. The assets and liabilities of the life assurance subsidiary are consolidated on a line by line basis and all intra group transactions are eliminated. The income
and expense of the life assurance subsidiary is shown within each relevant line item of the income statement whereas under Irish GAAP it was shown as a one line item. Movements in the value of the long-term assurance business is presented net of
tax.

IFRS also requires the consolidation of certain entities that were not required under Irish GAAP, including
securitization vehicles where appropriate.



|(b) | Cash and cash equivalents
|--- | -------------------------

Under
Irish GAAP, cash comprised cash and balances at central banks and loans and receivables to banks repayable on demand.

Under
IFRS, this is a presentation change on the face of the cash flow statement, resulting in an increase in the amount of cash and cash equivalents reported, as it now includes short-term non-equity investments and bank overdrafts.



|(c) | Financial instruments
|--- | ---------------------

Debt
securities held as financial fixed assets were accounted for on a historic cost basis under Irish GAAP. These debt securities were stated in the balance sheet at cost, adjusted for the amortization of any premiums or discounts arising on acquisition
and provisions for impairment. Debt securities held for trading purposes were stated in the balance sheet at market value. Both realized and unrealized profits on trading securities were taken directly to the statement of income and included within
dealing profits.

Under IAS 32 and 39, all debt securities and equity shares are classified and disclosed within one of the
following three categories: held-to-maturity; available-for-sale; or held at fair value through profit or loss.

Held-to-maturity financial instruments are stated in the balance sheet at cost, adjusted on an effective interest basis for the amortization of any premiums or discounts arising on acquisition and provisions for impairment. The amortization
of premiums and discounts is included in net interest income. Provisions for impairment are included in the income statement.

Available-for-sale financial instruments are stated in the balance sheet at fair value with unrealized holding gains and losses reported net of applicable taxes as a separate component in stockholders equity.

Debt securities held at fair value through profit or loss are stated in the balance sheet at market value with unrealized gains and losses
recognized immediately in the income statement. This has two sub categories: financial assets held for trading; and those designated at fair value through profit or loss.

Almost all of AIBs financial instruments, which were previously held as financial fixed assets, were classified as
available-for-sale on transition to IFRS. This gave rise to an adjustment to equity on transition.



|(d) | Derivatives
|--- | -----------

Non-trading derivative
transactions comprise transactions held for hedging purposes as part of the Groups risk management strategy against assets, liabilities, positions or cash flows, themselves accounted for on an accruals basis. The gains and losses on these
instruments (arising from changes in fair value) were not recognized in the profit and loss account immediately as they arose. Derivative transactions entered into for hedging purposes were recognised in the accounts on an accruals basis consistent
with the accounting treatment of the underlying transaction or transactions being hedged.

IAS 39 Financial
instruments: recognition and measurement requires all derivatives be recognized as either assets or liabilities in the balance sheet at their fair value. The accounting for changes in the fair value of a derivative depends on the intended use
of the derivative and the resulting designation, this being either fair value hedges or cash flow hedges.

Interest income
and expense on derivatives classified as hedges is recorded within interest income or expense as appropriate.

The mark to
market of derivatives classified as fair value hedges is recognised in the income statement within other financial income. The mark to market of derivatives designated as cash flow hedges is accounted for in equity, net of the deferred tax impact.

Because hedge effectiveness rules within IAS 39 have a stricter definition of qualifying hedges, this has resulted in the recognition of
current hedging derivatives at fair value with no matching offset where the associated hedging relationship has



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



not met the IAS 39 hedging requirements. There was also an impact on transition due to fair value movements on derivatives in existing hedge relationships,
that are designated as cash flow hedges being taken to the cash flow hedging reserve in equity.



|(e) | Netting
|--- | -------

Under Irish GAAP, where
the amounts owed by the Group and the counterparty are determinable and in freely convertible currencies and where the Group had the ability to insist on net settlement which is assured beyond doubt and is based on a legal right to settle net that
would survive the insolvency of the counterparty, the amounts were shown in the balance sheet as net assets or net liabilities as appropriate.

Under IAS Financial instruments: disclosure and presentation, netting is only allowed if the entity currently has a legally enforceable right to set off the recognized amounts and intends either to settle
on a net basis, or to realize the asset and settle the liability simultaneously.



|(f) | Loan impairment - allowance and provision for losses
|--- | ----------------------------------------------------

Under IAS 39, impairment provisions are recognized on an incurred loss basis if there is objective evidence that the Group will be unable to collect all amounts due on a loan according to the original contractual
terms. The estimated recoverable amount is the present value of expected future cash flows, which may result from restructuring or liquidation. Impairment is measured and allowances for credit losses are established for the difference between the
carrying amount and the estimated recoverable amount.

Where no objective evidence of impairment exists for an individual
asset but there are indications of incurred losses in the portfolio, IAS 39 permits the creation of provisions for credit losses on an incurred loss basis.

Application of the IFRS incurred loss model to AIB results in a reduction in the overall level of provisions carried at the balance sheet date and a transition adjustment to equity. In addition, on recognition of
individual impairment, the impairment loss will be higher than that recorded under current GAAP due to the requirement to discount the recoverable cash flows.

The higher impairment loss will be offset by the recognition of income on the net recoverable amount due to the passage of time.



|(g) | Loan origination - interest income and expense recognition
|--- | ----------------------------------------------------------

Under Irish GAAP, interest income and expense was recognized in the profit and loss on an accruals basis over contract lives except in respect of non-performing loans where interest was not taken to the profit and
loss account when recovery was doubtful. Fees which are considered to increase the yield on transactions were spread over the lives of the underlying transactions on a level yield basis. All costs associated with mortgage incentive schemes were
charged in the period in which the expense was incurred. Fees and commissions received for services provided were recognized when earned. Fees and commissions payable to third parties in connection with lending arrangements were charged to the
profit and loss account as incurred.

On transition to IFRS, certain fees receivable, and fees and commissions payable that
had previously been taken to the profit and loss account were treated as deferred income and deferred costs and shown within loans and receivables. This gave rise to a reclassification from liabilities and a transition adjustment to equity. These
deferred fees and costs will be amortized on an effective interest basis to the statement of income over the expected residual lives of the financial instruments. The change in policy gave rise to a reclassification from fee income/fee expense and
administrative expenses to interest income with an impact on the net interest margin.



|(h) | Finance leases
|--- | --------------

Income from finance
leasing transactions was apportioned over the primary leasing period on an after tax basis in proportion to the net cash investment using the investment period method for Irish GAAP. Rentals received in advance but not yet amortized to the profit
and loss account were included in other liabilities.

Under IAS 17 Leases, income from finance leasing
transactions is apportioned over the primary leasing period at a rate calculated to give a constant rate of return on the investment in the lease, without taking into account the taxation flows generated by the lease.

Finance lease receivables are stated in the balance sheet at the gross rentals receivable, less income allocated to future periods and
provisions for impairment. The reclassification of rentals received in advance from liabilities to assets reduces the size of the balance sheet.



|(i) | Interests in associated undertakings
|--- | ------------------------------------

Under Irish GAAP, the attributable share of income of associated undertakings was included in the consolidated profit and loss account using the equity method of accounting.

The Group share of tax of associates was included within the Groups tax charge in the Group profit and loss account and disclosed
separately in the notes to the accounts.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



IAS 1 Presentation of Financial Statements requires the Group to include
its share of the income of associated undertakings as a single item on a net of tax basis in the consolidated statement of income.



|(j) | Intangible assets and goodwill
|--- | ------------------------------

Under Irish GAAP, goodwill was amortized to the profit and loss account over its estimated useful economic life.

Under IFRS, from January 1, 2004, there was no amortization of goodwill recorded at December 31, 2003 (after adjusting for intangible assets required to be recognized under IFRS and any adjustments made to provisional fair values
on acquisitions). However, goodwill will be the subject of impairment testing at least annually under IFRS. In the event of impairment, the absence of previous amortization would lead to larger impairment charges than would have been necessary under
Irish GAAP.

Goodwill previously written off to reserves prior to 1998 will not be taken into account in the calculation of
profit or loss on disposal of subsidiary or associated undertakings. This will generate a higher profit, or lower loss, on disposal of subsidiary or associated undertakings acquired prior to 1998, under IFRS. The cessation of goodwill amortization
had a positive impact on the income statement for the year ended December 31, 2004.



|(k) | Software and software development costs
|--- | ---------------------------------------

For Irish GAAP reporting, operating software and application software were capitalized with computer hardware within tangible fixed assets. AIB capitalized software development costs under FRS 15, when it lead to the creation of a definable
software asset, subject to a de-minimise limit.

IAS 38 Intangible assets & system development costs
requires capitalization of computer software development costs as an intangible asset, where the entity will generate future economic benefits from the asset that will flow to the entity, and the cost of the asset can be measured reliably.
Capitalized costs are amortized over the softwares estimated useful life.

The classification criteria of IFRS gave
rise to a reclassification from tangible fixed assets to intangible assets, being the carrying value of previously recognized operating software.

The recognition requirements within IAS 38 increased stockholders equity due to an increase in capitalized assets.



|(l) | Acceptances
|--- | -----------

Acceptances were
accounted for on a net basis under Irish GAAP. There was no gross up of the amount to be paid and the amount receivable from the originator and thus no balance appeared in the balance sheet in relation to these products.

IAS 39 requires the recognition of a liability for acceptances from the date of acceptance. A corresponding asset due from the originator
is also recognized.



|(m) | Taxation
|--- | --------

Under IFRS, additional
deferred tax balances arise on transition in respect of temporary differences not previously recognized. These include temporary differences relating to the revaluation of properties and the roll over of taxable gains and the additional tax that may
arise on unremitted profits of associated and subsidiary companies.

There will be continuing income statement implications
from IAS 12, particularly the requirement to reflect the additional tax that would be payable on the remittance of profits by associated companies.



|(n) | Long term assurance business
|--- | ----------------------------

Accounting for contracts meeting the IFRS definition of insurance business is not impacted by IFRS 4.

Accounting
for investment products under IAS 39 serves to delay the recognition of income for a number of reasons. There is a narrower definition of costs that can be deferred on the sale of investment products. Initial charges on the sale of investment
products are deferred and accrued over the expected life of the product. There is no opportunity to account for the future surpluses on an embedded value basis.

As a consequence, there was a reduction in equity on transition, as the valuation of the discounted future earnings expected to emerge
from the business currently in force in the balance sheet will decrease. Income will be recognized on these contracts in later periods due to the change in the valuation basis.



|(o) | Classification of financial liabilities
|--- | ---------------------------------------

Under Irish GAAP capital instruments that are not shares were treated as liabilities if they involved an obligation to transfer economic benefits. All other capital instruments were reported in stockholders funds.

Under IFRS, financial instruments with an obligation to pay interest or repay principal are classified in the balance sheet as
liabilities. Financial instruments with no obligation to pay interest or repay principal are classified as equity.



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ALLIED IRISH BANKS, p.l.c.

Notes to Consolidated Financial Statements - (Continued)



The impact on the balance sheet was as follows:

The US $ 250 million non-cumulative preference shares are now classified as debt while the Reserve Capital Instruments are classified as equity. This
is a presentation change that will impact the face of the income statement and the balance sheet.



|(p) | Employee and retirement benefits
|--- | --------------------------------

Under FRS 17 Retirement Benefits the current service cost and past service cost of the defined benefit plans was charged to operating income and the expected return on assets, net of the change in the present value of the plan
liabilities arising from the passage of time, was credited to other finance income. Pension scheme assets were recognized in the balance sheet at their fair value based on current mid prices. The net pension scheme liabilities were shown in the
balance sheet net of deferred taxation.



|(q) | Dividends
|--- | ---------

Equity dividends
declared after the balance sheet date but before the accounts were approved by the Directors were treated as a deduction on the face of the profit and loss account and as a liability at the balance sheet date.

Dividends on preference shares were included in the profit and loss account on an accruals basis in accordance with FRS 4 Capital
Instruments.

Under IAS 10 Events after the balance sheet date dividends declared after the balance sheet
date are not recognized as a liability at the balance sheet date.

In respect of preference shares recognised as
stockholders equity, dividends are accounted for as a movement in stockholders equity and as a charge against earnings per share when they are declared.



|(r) | Share based payments
|--- | --------------------

Under Irish
GAAP, no expense was recognized for grants of options under the share option plans.

An expense was recognized for grants
awarded under the long term incentive plan schemes, equivalent to the intrinsic value of the shares awarded. This was charged to the profit and loss account over the vesting period, based on the number of options that were expected to vest. An
expense was recognized in respect of Save-As-You-Earn schemes.

IFRS 2 Share-based Payment requires a fair value
based method of accounting for all share-based payments. This value is determined using an options pricing model.

AIB
elected to apply IFRS 2 to all equity settled share based payments occurring after November 7, 2002 that had not vested by January 1, 2005.

Applying IFRS 2 to AIBs share based payment plans gave rise to a higher expense than that arising under Irish GAAP. It also gave rise to some changes in the timing of recognition of the expense with a transition
adjustment at January 1, 2004.



|(s) | Foreign currency
|--- | ----------------

IFRS 1 permits
companies to deem cumulative exchange differences as zero at January 1, 2004. This will primarily be a presentation change within stockholders equity.



|60. | POST-BALANCE SHEET EVENTS
|--- | -------------------------

There have been no
material post-balance sheet events which would require disclosure or adjustment to the December 31, 2005 Financial Statements. On February 21, 2006, the Board of Directors reviewed the Financial Statements and authorized them for issue.
These Financial Statements were approved at the Annual General Meeting of Shareholders on April 26, 2006.

AIB Mortgage Bank

On February 13, 2006 home mortgages in the amount of 13.6 billion were transferred from Allied Irish Banks, p.l.c. to AIB Mortgage Bank, a
wholly owned subsidiary and a designated mortgage credit institution for the purposes of the Asset Covered Securities Act, 2001.



|61. | DIVIDENDS
|--- | ---------

Final dividends were not accounted for
until they were approved at the Annual General Meeting of Shareholders on April 26, 2006. It was recommended that a final dividend of Eur 42.30c per ordinary share, amounting to a total of 368 million, be paid on April 27, 2006.
The Financial Statements for the year ended December 31, 2005 do not reflect this resolution, which will be accounted for in stockholders equity as an appropriation of retained profits in the year ending December 31, 2006.



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STATEMENT OF DIRECTORS RESPONSIBILITIES

IN RELATION TO THE ACCOUNTS

The following statement, which should be read in conjunction with the statement of auditors responsibilities set out within their audit report, is
made with a view to distinguishing for stockholders the respective responsibilities of the directors and of the auditors in relation to the accounts.

The directors are responsible for preparing the Annual Report and the group and parent company accounts, in accordance with applicable law and regulations.

The Companies Acts require the directors to prepare group and parent company accounts for each financial year. Under the Acts, the directors are required
to prepare the group accounts in accordance with international financial reporting standards (IFRS), adopted from time to time by the European Commission, in accordance with Regulation (EC) No. 1606/2002 of the European Parliament
and of the Council of July 19, 2002. The directors have elected to prepare the parent company accounts in accordance with Generally Accepted Accounting Practice in Ireland, comprising applicable law and the accounting standards issued by the
Accounting Standards Board and promulgated by the Institute of Chartered Accountants in Ireland.

The accounts are required by law and IFRS
to present fairly the financial position and performance of the group; the Companies Acts provide in relation to such accounts that references to accounts giving a true and fair view are references to their achieving a fair presentation.

In preparing each of the group and parent company accounts, the directors are required to:



| |  |  | select suitable accounting policies and then apply them consistently;
| | - |  | ---------------------------------------------------------------------



| |  |  | make judgements and estimates that are reasonable and prudent; and
| | - |  | ------------------------------------------------------------------



| |  |  | prepare the accounts on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

The directors consider that, in preparing the accounts on pages 87 to 185, which have been prepared on a going concern basis, the parent company and the
group have, following discussions with the auditors, used appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates and that all accounting standards, which, following discussions with the
auditors, they consider applicable, have been followed (subject to any explanations and any material departures disclosed in the notes to the accounts).

The directors are responsible for taking all reasonable steps to secure that the company causes to be kept proper books of account that disclose with reasonable accuracy at any time the financial position of the
parent company and enable them to ensure that its accounts comply with the Companies Acts. They have also general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect
fraud and other irregularities.

Under applicable law and the requirements of the Listing Rules issued by the Irish Stock Exchange, the
directors are also responsible for preparing a Directors Report and reports relating to directors remuneration and corporate governance that comply with that law and those rules.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the companys website.
Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors, having prepared the accounts, have requested the auditors to take whatever steps and undertake whatever inspections they consider to be appropriate for the purpose of enabling them to give their audit report.



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ALLIED IRISH BANKS, p.l.c.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - KPMG

To the Members and Board of Directors of Allied Irish Banks, p.l.c.

We have audited the accompanying consolidated balance sheets of Allied Irish Banks, p.l.c. and its subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, cash flows and
changes in stockholders equity for each of the years in the two-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Allied Irish Banks, p.l.c. as of December 31, 2005 and 2004 and the results of its operations and cash flows for each of the years in the two-year period ended
December 31, 2005 in conformity with the International Financial Reporting Standards (IFRSs) as adopted by the EU.

International
Financial Reporting Standards (IFRSs) as adopted by the EU vary in certain significant respects from U.S. generally accepted accounting principles. Information relating to the nature and effect of such differences is presented in Note 55
to the consolidated financial statements.

LOGO

KPMG

Chartered Accountants

Dublin, Ireland

May 19, 2006



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SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant, Allied
Irish Banks, p.l.c., certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 19th day of May, 2006.



ALLIED IRISH BANKS, p.l.c. (Registrant)By:

JOHN ODONNELLName: John ODonnellTitle: Group Finance Director




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AGM 2006

Special Resolutions

Special resolutions passed at Annual General Meeting of Allied Irish Banks, p.l.c. held
on April 26, 2006.



|1. | To consider and, if thought fit, pass a Special Resolution in the following terms:
|-- | ----------------------------------------------------------------------------------

That the Company and/or any subsidiary (as such expression is defined by Section 155 of the Companies Act 1963) of the Company be and is hereby generally authorised to make market purchases (as defined by
Section 212 of the Companies Act 1990 (the 1990 Act)) of Ordinary Shares of 0.32 each of the Company (share or shares as appropriate) on such terms and conditions and in such manner as the Directors,
or, as the case may be, the Directors of such subsidiary, may from time to time determine, but subject however to the provisions of the 1990 Act and to the following restrictions:



| | (a) | the maximum number of shares so authorised to be acquired shall be 91.8 million;
| | --- | --------------------------------------------------------------------------------



| | (b) | the minimum and maximum prices which may be paid for any such share shall be determined in accordance with Article 52 of the Articles of Association.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------

The authority hereby conferred shall be effective from 27thApril 2006 and shall expire at the close of business on the earlier of the date of the next Annual General Meeting, or 25thOctober 2007, unless previously varied, revoked or renewed in accordance with the provisions of Section 215 of the 1990 Act. The Company, or any
such subsidiary, may, before such expiry, enter into a contract for the purchase of shares which would or might be wholly or partly executed after such expiry and may complete any such contract as if the authority conferred hereby had not
expired.

Explanatory Note

This resolution enables the Company, if the Directors so decide, to buy up to 91.8 million Ordinary Shares in the market, being approximately 10% of the number of shares in issue. The maximum price that may be
paid for each share is 5% above the average closing price of the shares on the Irish Stock Exchange for the previous five business days. The minimum price that may be paid for each share is its nominal value. The authority will remain in force until
the AGM in 2007 or 25th October 2007, whichever is earlier.

There are options outstanding over some 18.0m Ordinary Shares,
which represent 1.96% of the issued Ordinary Shares (2.06% when shares held as Treasury Shares are excluded). Were this authority to be used in full and the shares cancelled, the outstanding options would represent 2.18% of the issued Ordinary
Shares.



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##### Table of Contents

|2. | Subject to the passing of the Resolution set out at item 6 above, to consider and, if thought fit, pass a Special Resolution in the following terms:
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------

That for the purposes of Section 209 of the Companies Act 1990 (the 1990 Act), the price range within which any treasury shares for
the time being held by the Company may be re-issued off-market shall be determined in accordance with Article 53 of the Articles of Association. The authority hereby conferred shall be effective from 27thApril 2006 and shall expire at the close of business on the earlier of the date of the next Annual General Meeting, or 25thOctober 2007, unless previously varied or renewed in accordance with the provisions of Section 209 of the 1990
Act

Explanatory Note

This resolution sets the price range for the re-issue off-market of treasury shares. If any shares are re-issued under the employee share schemes, the price will be determined as provided for in the rules of the
schemes. If the shares are re-issued in any other circumstances, the price may not be more than 5% below, or 20% above, the average closing price of the shares on the Irish Stock Exchange for the previous five business days.

The Company currently holds some 43.0 million Ordinary Shares, as treasury shares. These shares were purchased in the market in 2003 under
authority given by the shareholders; a further 5.6m Ordinary Shares are held by a subsidiary company, under a similar authority.



|3. | To consider and, if thought fit, pass a Special Resolution in the following terms:
|-- | ----------------------------------------------------------------------------------

That the power conferred on the Directors by paragraph (b) (ii) of Article 8 of the Articles of Association be and is hereby renewed for the period ending on the date of the Annual General Meeting in
2007 or, if earlier, 25thJuly 2007, and for such period the Section 23 Amount (as defined in paragraph
(d)(iv) of the said Article) shall be 14.69 million.

Explanatory Note

This resolution renews the Directors authority to allot shares for cash, without being required to offer such shares firstly to existing
shareholders. The authority would remain in force until the AGM in 2007 or, if earlier, 25th July 2007. The proposed limit represents approximately 45.9 million Ordinary Shares, which is approximately 5% of the issued Ordinary Shares, and
accords with the Guidelines of the Irish Association of Investment Managers.