Bank of Scotland Ireland (BOSI), the Irish arm of HBOS, made profits before tax of €157 million in the year to last December as assets exceeded €11 billion for the first time.
Income rose by 26 per cent to €274.4 million, while costs rose by 13 per cent to €83.7 million. The before-tax profit figure compares with €103.3 million in 2002 when the bank took a €12.4 million restructuring charge.
Mr Mark Duffy, the chief executive of BOSI, said the bank had consolidated its position as a leading business bank.
Loans grew by 17 per cent to €8.19 billion, while deposits were up 34 per cent to €4.53 billion. Net margins were down slightly from 1.78 per cent to 1.76 per cent, while the bank's cost to income ratio fell from 34 per cent to 31 per cent.
The bad debt charge fell from €22 million to €18.4 million, representing 0.24 per cent of loans. The bank wrote off debts of €8.3 million last year compared with €6.6 million in 2002.
Mr Duffy said the bank expected to do up to €2 billion in new business this year and hoped to over take Bank of Ireland in the market for business banking.
He said there had been a big surge in business in this sector on foot of an aggressive marketing campaign for its business current account which targeted it rivals.
Businesses were maintaining their current accounts with existing banks but also opening current accounts with BOSI to avail of its more attractive overdraft rates and the interest paid on credit balances, said Mr Duffy.
"Notwithstanding that there is no mechanism for easily switching current accounts, people are voting with their feet," he said.
BOSI plans to target the corporate banking market this year, according to Mr Duffy. The bank currently only does a limited amount of lending to large companies, concentrating instead on the SME sector. Its parent group HBOS - which was created by a merger between the Halifax and Bank of Scotland in 2001 - said group pre-tax profits rose 29 per cent to £3.77 billion (€5.63 billion), with retail earnings up 19 per cent at £1.69 billion.
The bank continues to lead the UK mortgage market with a 25 per cent share of net new lending.
Mr James Crosby, chief executive, said the bank had started to tighten its lending criteria in the mortgage market even though he expected low interest rates and low unemployment to continue to underpin the housing market.
HBOS said it expected to ease back into mortgage lending in 2004 and now expected to take 23 per cent or less of the market this year. The group is aiming to achieve a return on equity of 20 per cent by the end of the year and said it was on track to do so.
HBOS's return on equity improved from 15.9 to 17.7 per cent in 2003. The return on equity at BOSI rose from 29 per cent to 33 per cent.
However, group net interest margins deteriorated from 1.83 per cent to 1.77 per cent, which HBOS blamed on an increased requirement for wholesale funding of loan growth. The margin deteriorated by five basis points in the second half of the year.The shares fell 10p to 754p. The cost to income ratio fell to 41.6 per cent from 45.2 per cent.
Merger synergies are running 24 per cent ahead of schedule at £582 million. The full-year dividend is 30.9p, payable from earnings per share of 68.5p.
