The Irish subsidiary of the German bank that has agreed to buy its troubled German counterpart SachsenLB made a profit before tax of €21.3 million in the first half of 2007, according to unaudited accounts for the period released yesterday.

However, LBBW Bank Ireland plc said market turmoil was due to hit profits in the second half of the year.

"The current credit market turmoil and asset illiquidity has had an impact on the product pipeline of the bank, and a number of new product launches have been postponed until the market returns to normality, and market liquidity and demand is restored," the bank said in a statement issued through the stock exchange.

"The deferral of product launches will have a negative impact on expected earnings for the remainder of the year."

The bank said it had reduced its assets by 18 per cent, to €6.2 billion from €7.61 billion, through the sale of certain assets to other group units. The sales formed part of a geographic restructuring of portfolios.

LBBW is Germany's biggest regional bank with total assets of about €430 billion at the end of 2006. On Tuesday it said it was largely sheltered against market turbulence triggered by problems in the US subprime mortgage sector.

"LBBW has structured financing related to subprime, but the volume is minimal compared with total business volume," it said in a statement.

LBBW agreed to buy SachsenLB last weekend after the latter got into funding difficulties arising from investments in the US subprime mortgage sector, made by way of Irish-based investment vehicles known as conduits.