Irish Permanent continues to benefit from the buoyant housing market, making a pre-tax profit of almost £26 million in the first six months of the year, up more than 11 per cent on the same period in 1996. Moreover, it expects further strong growth in its core mortgage market for the rest of the year. The results show Irish Permanent advanced £328 million in home mortgages in the first half, up from £246 million in the same period last year.
The figures came in slightly below market expectations and this, along with a general weakness in the financial stocks, contributed to a 10p drop in its share price in Dublin yesterday to 650p.
"The group enjoyed a substantial share of the buoyant market for residential mortgages in Ireland, albeit at tighter margins than reported in 1996," said the chief executive, Mr Roy Douglas. Total loans outstanding at the end of June were £3.4 billion, up 9.6 per cent. He again stressed Irish Permanent's desire to acquire the State-owned TSB Bank, adding that his company could easily raise the cash through a share issue.
Pre-tax profits amounted to £25.9 million, an increase of 11.5 per cent on the previous half-year total of £23.3 million. Profit after tax came to £18.2 million, up 11.5 per cent on the 1996 period. Earnings per share were 17.7p, up 11.4 per cent. Shareholders are to receive an interim dividend of 4.6p net per share, up 15 per cent.
The company said the growth in profits stemmed from increased net interest income - the income from the core deposit taking and lending business - strong growth in non-interest income and cost containment. Net interest income in the first half of 1997 increased to £53 million from £48.5 million, an increase of 9.3 per cent. However, intense competition narrowed margins, with the net interest margin falling to 2.46 per cent, from 2.72 per cent at the end of last year.
Also contributing to higher profitability was a rise in the contribution from the Irish Progressive life assurance subsidiary, where earnings rose from £5.1 million to £5.6 million. Higher dealing profits and other non-interest income also contributed, while the provision for bad debts remained unchanged at £1.4 million.
In the six months the group's total assets grew 13.9 per cent to £5.628 billion, from £4.939 million. Mr Douglas said the company now had some 22,000 current account holders, and a mortgage market share of around 21 per cent.
The chairman, Mr John Bourke, said that despite competition in the mortgage sector, the company was not weakening its normal lending criteria. As he could see no other financial institutions doing this either, he saw no reason for concern.
"However, some first time buyers are having difficulties finding the necessary capital. This will probably lead to a dampening of the first-time market, especially in our cities, and that is a good thing," Mr Bourke added.
Mr Douglas said that Irish Permanent was still actively seeking suitable acquisitions, both at home and in Britain.
"It would appear that TSB may be on the market in the not-too-distant future," he added, referring to the possibility that the Cabinet may agree later this year to sell the bank. "We are interested. We believe the TSB and ourselves would be a strong business fit and a strong cultural fit.
In such an event, Irish Permanent would probably issue new shares to pay for the acquisition, Mr Douglas added.
The company stressed that its customers had left unclaimed 8,300,000 shares in the company - worth some £54 million. These must be claimed by the third week in September.
