Pretax profits at National Irish Bank (NIB) jumped from €4 million to €28 million in 2007 due to a rise in business loans and strong demand among switching home owners for the bank's lower-rate loan-to-value (LTV) mortgages. Simon Carswell, Finance Correspondent, reports.

The bank increased its loan book by 35 per cent to €9.3 billion, double the market rate, while mortgage lending rose by 41 per cent, three times the market rate, the bank said.

The bulk of new home loans were provided on switcher mortgages. NIB offers a discount margin above the European Central Bank rate to homeowners who have built up equity on their homes and have low mortgages.

The bank's underlying profit, which excluded the cost of integrating NIB's operation with its owner, Danish bank Danske, more than doubled to €79 million during 2007, while total income rose 30 per cent to €195 million.

Business loans increased by 34 per cent and customer deposits increased by 12 per cent.

NIB chief executive Andrew Healy said the bank took between 15 per cent and 20 per cent of the switcher mortgage market, which was worth €6 billion in 2007.

Mr Healy expected this market to double "over the next couple of years".

The average LTV ratio on NIB's mortgages is 55 per cent, compared to an industry average of 70 to 75 per cent, he said.

Mr Healy said Danske was well funded, which allowed NIB to offer cheaper products, despite the higher cost of interbank borrowing due to the global credit crisis.

He said the bank had no plans to increase its mortgage rates. "While our funding costs have increased, we have still been able to keep our pricing keen."

The bank's cost-to-income ratio fell to 60 per cent from 74.6 per cent. Mr Healy said he hoped to bring this down to about 50 per cent over the next few years.

Bad loans increased to €15.8 million, which included loans provided to the two solicitors before the courts, representing 0.2 per cent of total loans. "It is inevitable that credit losses will continue to grow over the coming years but we have a prudent lending policy," said Mr Healy.

The bank opened five new branches in 2007 and plans to open another five this year as part of a €20 million investment.

NIB is targeting new customers in the business and small to medium-sized enterprise sector by cutting its overdraft rate by a third to 6.75 per cent and by waiving its annual maintenance fee of €640 until the end of 2009. The bank is also offering businesses 400 free online domestic transactions a month.