Anglo Irish Bank earned a round of sizable analyst upgrades yesterday after posting bumper full-year results and flagging a key change in its policy on bad debts.
The bank surpassed market expectations by reporting a 33 per cent rise in pre-tax profits to €346.5 million for the year ending on September 30th.
Lending, the main driver behind the growth and the source of 80 per cent of the bank's profits, was 34 per cent ahead at €18.1 billion. Total income grew by 21 per cent to €571.2 million, while total assets stood at €25.5 billion, up 39 per cent.
The bank's loan pipeline is also healthier than ever, with loans worth €3 billion approved since the end of September, compared with €2.4 billion at the same stage last year. Some 54 per cent of this year's loan business is from the Republic, with 41 per cent drawn from the UK and the remainder from an operation in Boston.
Welcoming the overall performance, Anglo chief executive Mr Sean FitzPatrick said the bank was "going to do nothing differently" on the operational front in the coming year, aside from widening its deposit base in the Republic, the UK and Austria.
Funding rose by 41 per cent to €22.4 billion last year, with the bank expecting to attract a further €6 billion in 2004. In a move that is certain to boost Anglo's share price, Mr FitzPatrick signalled a shift in the bank's provisioning policy that will see it freeze the amount it has set aside for bad or doubtful debts for a number of years.
The bank's general provisions stand at €230 million, a level which Mr FitzPatrick said was "adequate" for the expected size of the bank's loan book over the next three or four years.
"We're going to leave it there and we're not going to add any more to it," he said. Last year, Anglo set aside €47 million in general provisions. If this had not been done, pre-tax profits would have been some 14 per cent higher for 2003.
"We'll not be doing that this year because of our status in terms of asset quality, which is superb," Mr FitzPatrick said.
The provisioning "holiday" was welcomed by analysts, who said it would stop future profitability being penalised for the bank's solid lending growth.
Anglo has been considering a shift in its provisioning strategy for a number of years, but hesitated to make dramatic changes in the past because of global investor doubts about firms' accounting policies.
Consensus forecasts now see earnings per share at 100 cents for this year, compared with previous expectations of 80 cents. One commentator described Anglo as "a phenomenal story".
Earnings per share rose by 34 per cent to 78.03 cents in 2003. The bank's shares rose 40 cents to €10.85 yesterday.
