IIB BANK increased its profits after tax by 10 per cent to €137 million in 2007 as loan income rose by 11 per cent to more than €17 billion.
The bank said that the residential market was undergoing "a significant adjustment". The bank's chief executive Ted Marah said activity in the mortgage market "remained muted" and that lending was down 14 per cent in January compared with a year earlier, although activity was starting to pick up again.
"As prices are becoming a bit more realistic, buyers are coming back into the market," said Mr Marah. He said that, although there was a slowdown in the property market in the last months of 2007, demand for accommodation was still high as rents rose and 67,000 more people were in work.
IIB's assets grew 10 per cent to €24 billion. Business volumes in the small and medium-sized business sector rose by 20 per cent, while residential mortgages increased by 14 per cent. The bank's capital base grew by more than 10 per cent to exceed €1.2 billion. Its capital base was strengthened by an injection of €118 million by IIB's parent company, Belgian bank KBC.
Mr Marah said IIB has made a provision in its 2007 accounts for loans provided to the two solicitors at the centre of various legal actions. He declined to say how much the bank had set aside in relation to these loans, but said that the level of exposure was "low".
"As a single debt, it is not as big a trauma for us as the vulnerability in the property market to solicitors' undertakings. If that falls apart, it creates a big problem for us as a society," he said.
The bank obtained a High Court injunction last October against Walkinstown-based solicitor Thomas Byrne, stopping him from reducing his assets below €9 million, the amount which it lent to him.
IIB is also owed money by missing solicitor Michael Lynn and some of his clients over loans provided for property deals.
Mr Marah said that bad debts remained low and he had no concerns about the ability of borrowers to meet their mortgage repayments. There have been no major increases in arrears, he said. "It is not significant enough that it features on my radar. We are not seeing any emerging issues on our home loans." The average loan-to-value ratio was 60 per cent. He said the bank had no concerns about loans provided to developers who have borrowed to build projects in the slowing residential property sector. "It shows the flexibility of developers to cut off supply when sales go down."
He said that, unlike some other banks, IIB was not reviewing with any greater degree of scrutiny loans provided to housebuilders. "The time to look at them is before you put the money out," he said.
Mr Marah declined to comment on the future of IIB's subprime lender Stepstone, its joint venture with US investment bank Lehman Brothers.
The lender has suspended lending due to the higher cost of funding in the international markets and the collapse of the securitisation markets, on which it relied to fund its loan book.
