Irish Nationwide Building Society, which reported a 17 per cent rise in pre-tax profits to £29.7 million (€37.7 million) for 1999, wants changes in legislation to allow the society to become a mutual bank, according to its managing director. Mr Michael Fingleton said: "Building society legislation is outdated. In this day and age we should not be restricted in what we can do or how we can do it, other than prudential supervision of our abilities to engage in services. We would like to see a situation where we could continue to be a mutual but have all the powers the banks have and options to do whatever we wanted to do."

Mr Fingleton has long campaigned for the removal of Section 102 of the Building Societies Act which prevents any institution building up a stake of more than 15 per cent in a demutualised society for five years.

Expressing "no particular affection" for mutuality, he said he would "dearly love to link up with a European bank which had no network in the Irish market". He would abandon mutuality if there were sound commercial reasons to do so, he said.

"We have to compete head-on in the market with the banks. We have no privileges, so there shouldn't be any restrictions. We need to have mobility and flexibility," he warned. Declining to discuss in detail the restrictions of concern to him, Mr Fingleton mentioned only the deposit to lending ratio requirements which, he said, increased the cost of funds for building societies.

Asked if its small size was a problem, he said: "Our results have shown that size is not a problem. We have shown that we can manage effectively but if we made a suitable link-up with a well capitalised partner we could take on the market seriously." But he said it would be difficult to maintain his low cost base without a link-up and that the availability of staff was a problem. He forecast a 20 per cent rise in new house prices this year with increases to continue for the next two years due largely to a shortage of serviced building land. "While we would like house prices to stabilise we do not accept that there will be a collapse in the market." "In each of the last two years prices have on average increased by at least 20 per cent per annum and investors have now come back into the market to compete with home owners for the limited supply available," he argued.

While the supply of building land in the greater Dublin area had increased, most of it was incapable of being serviced in the short and medium term and many schemes were being held up in the planning process due mainly to shortages of staff to deal adequately with the workload, he maintained.

Strong growth in mortgage lending and tight cost control boosted pre-tax profits at Irish Nationwide last year. Tax planning meant that profits at the after-tax level were up more than 70 per cent at £29.4 million. The group paid only £314,000 in tax compared with £8.2 million for 1998. Mr Fingleton said the tax bill was reduced by using capital allowances on equipment. But he declined to discuss this further, citing "a confidentiality agreement with a third party".

The results show a 14 per cent rise in net interest income to £45.3 million while total income was 12.4 per cent ahead at £50.6 million. Costs were just 6.2 per cent up at £19.4 million, bringing the cost income ratio down to 34.4 per cent from 42 per cent.

Gross lending - before repayments - was 39 per cent higher at £749 million while the society advanced net new loans of £430 million to bring the total loan book to £1,740 million at the end of 1999. It took £282 million into deposits and shares accounts last year to bring total customer accounts to £1,459 million, a rise of 24 per cent. By the end of the year reserves had increased to £195.6 million from £166.2 million giving the society a high absolute reserve ratio of 8.4 per cent.