ALLIED IRISH BANKS, P.L.C. INTERIM MANAGEMENT STATEMENT

Trading  conditions  in  the  year  to  date remain challenging, particularly in
Ireland.  Conditions have improved in Great  Britain and our Capital Markets and
Polish businesses are performing well. In the US, M&T reported strong results in
the first quarter of 2010.
 
OPERATING                                                                 PROFIT
Please note that all trends in this update are in constant currency terms.
 
A combination of factors is placing downward pressure on our net interest margin
and / or operating profit before provisions this year. These factors include:
 
  * Highly competitive and uneconomic market repricing of customer deposits
  * The elevated cost of wholesale funding and the higher cost of the Government
    Guarantee
  * Reduced income on capital and increased interest payments on higher yielding
    bonds following the two capital exchanges successfully completed in the past
    year
  * NAMA administration costs and reduced income from NAMA loans
  * Targeted loan volume reductions outside Ireland to reduce our loan to
    deposit ratio
 
Positive  factors, including loan repricing across  all portfolios and a reduced
impact  or non recurrence of   some of the above factors, are expected to have a
much more significant effect in the medium term future than in 2010.
 
At  the  end  of  April,  overall  loan  and  deposit  volumes were both broadly
unchanged  compared to December  2009. Loan volumes exclude  the effect of loans
transferred to NAMA
 
Customer  demand for credit is  weak in Ireland where  we have increased lending
capacity  to the business and mortgage  sectors. We are deleveraging our balance
sheet by taking some opportunities to reduce lending in our other businesses.
 
Costs  continue to  be closely  managed and  reduced. We  are developing  a cost
reduction programme that will reset the base to a lower level, reflecting a more
streamlined  structure  more  aligned  with  the  bank's  reduced size following
completion of the business disposals now underway.
 
ASSET QUALITY
 
NAMA
In concluding that AIB is required to raise ¤7.4bn of additional equity capital,
the  Financial Regulator has assumed a 45% discount to AIB's NAMA eligible loans
of  c. ¤23bn.  The actual  discount will  be determined  when all  the loans are
valued  and may  differ from  the aforementioned  45%. When further valuation is
sufficiently  advanced  we  will  advise  the  market of any material changes in
expectation  of the amount  of loans that  will transfer to  NAMA or the overall
discount rate. Loans will continue to transfer to NAMA in tranches and there may
be  wide variations  in the  discount rate  for individual  tranches. Variations
could  occur due to factors such as  location and the proportion in each tranche
of land and development relative to investment and other associated loans.
 
Pending  transfer of loans to  NAMA we continue to  assess their quality. Credit
downgrades  are continuing  and where  there is  evidence of  impairment, we are
incurring bad debt charges. These charges are increasing the stock of provisions
we  hold for  NAMA eligible  loans which  will partly  offset the  effect of the
discounts applied to the loans on transfer.
 
Non-NAMA
 
Republic of Ireland Division
 
Bad debt charges in the first quarter were at a rate similar to that incurred in
the  full year of  2009. The stock of  provisions held for  loans reflects their
current risk profile and the provision requirement for the remainder of the year
will be determined predominantly by economic conditions.
 
Our  residential mortgage book of almost  ¤27bn continues to perform better than
the sector average. The bad debt provision rate requirement in the first quarter
of  2010 remains modest  and not  materially above  the rate  for the  full year
2009. As  expected, arrears  continue to  increase and  future loss  levels will
largely be determined by unemployment in Ireland.
 
The credit grading profile of property & construction loans continues to weaken,
reflecting  low  levels  of  activity  and  demand.  Following the NAMA transfer
process,  this portfolio will reduce to c.  ¤12bn of which c. ¤9bn is investment
property and c. ¤3bn is land and development.
 
Our other portfolios are performing in line with our expectations.
 
International (Capital Markets, CEE and UK divisions)
 
There are clear signs of stability in the credit profiles of our Capital Markets
and Polish businesses. In the UK, there are also signs of stability in our Great
Britain  portfolios though  conditions remain  challenging in  Northern Ireland.
First  quarter  provision charges in each  of these divisions - Capital Markets,
CEE and UK - were less than the rate for the full year 2009.
 
CAPITAL
Our  capital ratios at the end of March were broadly unchanged from the position
at  December 2009. These  ratios reflected  ongoing bad  debt provisions on NAMA
eligible loans, which further discount the value of the loans prior to transfer,
and the c. ¤445m gain from the capital exchange completed in March.
 
In  our announcement of 30(th) March 2010 we set out a series of capital actions
we  intend to take  in response to  the increased regulatory capital requirement
announced  on the same day and to be  achieved by the end of 2010. These actions
include  asset /  business disposals,  equity raising  and we will also consider
further  liability  management  opportunities.  We  will  advise  the  market of
progress in relation to our capital actions as it occurs over the coming months.
 
A  recapitalisation  plan  has  been  submitted  in  response  to  the Financial
Regulator's request of 30(th) March.
 
FUNDING
Customer  deposits  remain  our  principal  source  of funding at 51% of overall
funding.  Our  loan  to  deposit  ratio  at  the end of March was broadly stable
compared  to the 146% ratio at  the end of 2009 and  significantly lower than at
the  end of  March 2009. We  expect to  continue deleveraging the bank's balance
sheet  and the effect of transferring loans to NAMA is material in that respect.
On  a proforma  basis, the  loan to  deposit ratio  at the  end of  March 2010,
excluding  NAMA eligible loans,  was c. 124%. The  NAMA bonds will significantly
improve  our  liquidity  profile,  further  enhancing  our  contingent liquidity
resources.
 
Term funding activity has been successful in the year to date, well supported by
the  ELG (Government Guarantee)  scheme. We have  completed over ¤6bn of greater
than  1 year term funding in a  combination of public benchmark transactions and
private placements. This ¤6bn is well ahead of our target and represents c. 60%
of  maturing  term  funding  (net  of  covered  bonds)  in  2010. Of our overall
wholesale  funding c. 41% now  has duration greater  than 1 year, compared to c.
30% at the end of 2009. We have little maturity of term funding in 2011.
 
Overall  funding market  conditions and  pricing have  improved during the first
quarter  of  2010. However,  recent  negative  sentiment in the sovereign credit
markets  demonstrates that markets remain volatile  and vulnerable to changes in
sentiment.  Duration  remains  short  and  pricing elevated compared to historic
norms.
 
ISSUE  OF ORDINARY SHARES  TO NATIONAL PENSIONS  RESERVE FUND COMMISSION (NPRFC)
Discussions  on our  restructuring plan  with the  European Commission  (EC) are
ongoing  and are being conducted in  conjunction with the Department of Finance.
At  the request of  the EC, AIB  has agreed not  to make discretionary coupon or
dividend payments on certain of its securities. As a result, the annual dividend
on  the NPRFC's ¤3.5bn preference shares,  amounting to ¤280m, due today 13(th)
May,  will  not  be  paid  in  cash.  Under AIB's articles of association, it is
required  to issue ordinary shares to the NPRFC  equal in value to the amount of
the  dividend that would otherwise have been  payable. As a consequence of this,
AIB  will issue 198,089,847 ordinary shares to the  NPRFC by way of bonus issue.
This  number  of  shares  is  equal  to  the aggregate cash amount of the annual
dividend  of ¤280m on the  NPRFC's holding of preference  shares, divided by the
average  price  per  share  in  the  30 trading  days  prior  to  today's  date.
Application will be made in due course for the listing of these new shares. This
issue of shares increases the ordinary shares of AIB in issue to 1,080,845,303,
of  which the 198,089,847 shares  to be issued  to the NPRFC represents 18.33%,
bringing  the NPRFC total ownership of  AIB ordinary shares to 18.61% (excluding
any shares which the NPRFC would be allotted if it were to exercise its warrants
over  ordinary shares granted to it when it subscribed for the preference shares
in 2009).
 
Further  details of our  performance and outlook  will be provided  in our 2010
Interim Results announcement scheduled for 28(th) July 2010.
 
                                     -ENDS-
 
For further information please contact:
 
Alan Kelly                               Catherine Burke
 
General Manager, Corporate Services      Head of Corporate Relations and
                                         Communications
 
AIB Group                                AIB Group
 
Dublin                                   Dublin
 
Tel: +353-1-6412162                      Tel: +353-1-6413894
 
email: alan.j.kelly@aib.ie               email: catherine.e.burke@aib.ie
 
Forward-looking statements
 
This  document contains certain "forward-looking  statements" within the meaning
of  Section 27A of the US Securities Act of 1933, as amended, and Section 21E of
the  US  Exchange  Act  of  1934, as  amended,  regarding  the belief or current
expectations  of  the  Group,  AIB's  Directors  and other members of its senior
management  about  the  Group's  financial  condition, results of operations and
business  of the  Group and  certain of  the plans  and objectives of the Group,
including  statements relating to possible future write-downs or impairments. In
particular,  certain statements with regard  to management objectives, trends in
results  of operations, margins, risk management,  competition and the impact of
changes  in Financial Reporting  Standards are forward-looking  in nature. These
forward-looking statements can be identified by the fact that they do not relate
only  to historical or  current facts. Forward  looking statements sometimes use
words  such  as  'may',  'could',  'would, 'will, 'aim', 'anticipate', 'target',
'expect',  'estimate', 'intend',  'plan', 'goal',  'believe', or  other words of
similar  meaning. Examples of forward-looking  statements include, among others,
statements  regarding  the  Group's  future  financial  position, income growth,
business  strategy,  projected  costs,  capital  position,  estimates of capital
expenditures,  and  plans  and  objectives  for  future operations. Because such
statements are inherently subject to risks and uncertainties, actual results may
differ  materially  from  those  expressed  or  implied  by such forward-looking
information.
 
These  forward-looking  statements  are  not  guarantees  of future performance.
Rather,  they are based on  current views and assumptions  and involve known and
unknown  risks, uncertainties and  other factors, many  of which are outside the
control  of AIB and are  difficult to predict, that  may cause actual results to
differ  materially from any future results  of developments expressed or implied
from  the forward-looking statements. Factors that could cause actual results to
differ  materially from those expressed or  implied include, but are not limited
to,  changes in  economic conditions  globally and  in the  regions in which the
Group  conducts its  business, changes  in fiscal  or other  policies adopted by
various  governments and regulatory  authorities, the effects  of competition in
the  geographic and business  areas in which  the Group conducts its operations,
the  ability  to  increase  market  share  and  control expenses, the effects of
changes  in taxation or accounting standards and practices, acquisitions, future
exchange and interest rates, the risk that the Group may not participate in NAMA
or  that the NAMA Scheme may turn out to be unsuccessful in achieving its goals,
the  lack of control over  the nature, number and  valuation of the assets to be
transferred to NAMA and the success of the Group in managing these events.
 
The  Group  cautions  that  the  foregoing  list  of  important  factors  is not
exhaustive. Investors and others should carefully consider the foregoing factors
and  other uncertainties and events when  making an investment decision based on
any  forward-looking  statement.  In  light  of  these  risks, uncertainties and
assumptions, the forward-looking events discussed in this Report may not occur.
 
The  forward-looking  statements  speak  only  as  of the date of this document.
Except  as required by the Irish  Financial Regulator, the Irish Stock Exchange,
the  UK Financial  Services Authority,  the London  Stock Exchange or applicable
law,  AIB  does  not  have  any  obligation  to  update  or  revise publicly any
forward-looking  statement,  whether  as  a  result  of new information, further
events  or otherwise. AIB  expressly disclaims any  obligation or undertaking to
publicly  release  any  updates  or  revisions  to any forward-looking statement
contained in this document or incorporated by reference to reflect any change in
AIB's  expectations with regard  thereto or any  change in events, conditions or
circumstances on which any such statement is based.
 
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