With earnings strong and capital flush at Allied Irish PLC, speculation is growing that the parent of First Maryland Bancorp may be looking to expand its empire further, particularly in the Mid-Atlantic region.
Allied yesterday reported a 16.6 percent increase in 1994 profits, to 341 million Irish punts, or $528 million. That compares with 1993 profits of 292.6 million punts, or $453 million, a year earlier.
The company's stock fell yesterday on concerns about Allied's lending margins amid higher short-term interest rates. The company's American depositary receipts, which each represent six shares of common stock, fell 25 cents yesterday, to $24.625. More than 12,000 shareholders holding ADRs representing 8 percent of the stock are in the Mid-Atlantic region, according to First Maryland, and many of them are in the Baltimore area.
Increasingly, Allied is relying less on earnings from lending at home. Its main AIB Bank division operates in its home country, the Republic of Ireland, as well as in Northern Ireland and England. Roughly half the parent's profits last year came from operations outside Ireland. First Maryland accounts for almost one-third of Allied's $32 billion in assets.
"Frankly, one of the reasons people trust them is that their record outside Ireland is so good," said Diane Merdian, Smith Barney Inc.'s senior banking analyst for Europe.
Despite strong economic growth at home -- almost 6 percent gross domestic product growth last year, according to Ms. Merdian -- speculation is rife that Allied will soon announce a major acquisition elsewhere. It has bolstered its main capital ratio, which measures financial reserves compared with the overall size of the company, to 8.6 percent, one of the highest in the United Kingdom.
Allied has turned its sights to the east, with an initial stake in the Polish bank Przemyslowo-Handlowy. Allied helped underwrite the sale of the bank to the public and expects to end up with an equity position of 11 percent to 16 percent, said chief financial officer Neil Dean.
Allied's Baltimore-based subsidiary, First Maryland, has $150 million in unused proceeds from a 1993 sale of preferred stock in the United States. Mr. Dean said the company had made a number of offers for "small situations" in the United States that had been rebuffed.
Officials at both First Maryland and its parent have denied rumors recently of acquisition talks with Signet Banking Corp., the Richmond, Va.-based company that is about to spin off to the public its credit card subsidiary. But it's no secret that First Maryland, which also owns York Bank & Trust in Pennsylvania and Omni Bank in Delaware, needs more of a presence in the Washington area to remain competitive with large out-of-state banks such as NationsBank Corp.
The company has been negotiating to buy Zirkin-Cutler Investments, a Washington-based money manager with about $1 billion in assets under management, according to an internal memo written by the head of First Maryland's Washington-area operations. The company refused to comment on the situation.
But Frank P. Bramble Sr., First Maryland's chief executive officer, did acknowledge the need to grow. "I think it's important for us to broaden our base in the region in which we operate," he said in an interview recently. Through growth, First Maryland can spread its costs, which are above industry averages, over a larger base of revenues.
"And that's why if we have the right opportunity, we'll capitalize on it," Mr. Bramble said.
The Baltimore company's earnings have fallen flat in the past few quarters. With the rise in interest rates, gains from securities trading have dropped sharply, Mr. Bramble explained, but core earnings remain strong.
First National this year introduced a new Visa card with the user's photo embedded in it, a product that Mr. Bramble said shows promise, according to early indications. And while he has cut costs -- and dampened morale -- by laying off numerous senior and mid-level officers, Mr. Bramble says that employment will grow this year, either internally, through acquisitions or both.
Allied Irish "management is very smart, very shareholder-oriented and very diligent," Ms. Merdian said.