Commerzbank, the third-largest German bank by capital, took a €21 million dividend from its biggest IFSC company last year, new Companies Office filings show.

Commerzbank Europe (Ireland) concentrates on international lending with top-rated clients.

Its managing director, John Bowden, said the outlook for 2006 was favourable, given the upward trend in interest rates.

While lending margins were extremely low, he said that "increased merger and acquisition activity will stabilise the loan market".

Accounts for the IFSC unit, which employs 27, show that its pretax profit rose to €24.12 million in 2005 from €19.94 million a year earlier. Operating profits rose to €30.08 million from €25.88 million.

After paying taxes of €2.41 million, the net profit was €21.71 million.

The bank was a beneficiary of the special 10 per cent corporation tax rate that applied to all IFSC companies until the end of last year. The standard corporation rate of 12.5 per cent has applied from this year.

The €21 million dividend payment to parent bank Commerzbank AG was up from €20 million in 2004.

The value of the unit's balance sheet rose to €4 billion at the end of 2005 from €3.33 billion a year earlier and Mr Bowden said this was mainly attributable to an increase in securitisation activities with mortgage lenders.

The value of debt securities and other fixed-income securities rose to €2.23 billion at the year-end from €1.62 billion a year earlier.

The value of loans and advances to banks rose to €842.23 million from €816.52 million while loans and advances to customers rose to €804.62 million from €683.24 million.

According to the latest accounts, the volume of business rose to €6.1 billion from €5.5 billion in 2004. This includes committed undrawn credit lines, credit default swaps and money market transactions.

"There was an opportunity last year when bond yields reached historic lows and we were able to take the benefit on the fixed rate loan side. We benefited from that in 2005," Mr Bowden said.

Staff costs rose to €2.34 million from €2.16 million, with wages and salaries rising to €1.96 million from €1.83 million and pension costs rising to €162,000 from €132,000.

Commerzbank AG reported a threefold increase in net profits to €1.17 billion for 2005 but that result was flattered by a number of exceptional gains, including the profit on the sale of a stake in Italy's Banca Intesa. The parent bank last week reported big rise in its first-quarter net profits to €740 million from €395 million in 2005.

Commerzbank AG owns a separate asset management business in the IFSC, which trades as Cominvest Asset Management.

The latest filings show that it made a pretax profit of €4.07 million in 2004, up from €2.34 million in 2003.

The dividend payment from this company slipped to €2.5 million in 2004 from €10.5 million in the previous period.