National Irish Bank (NIB) slipped into the red in the first quarter, blaming the cost of integrating itself with its parent's technology systems, writes Una McCaffrey

The bank, which relaunched over Easter, reported a pretax loss of €5 million for the three months to the end of March. This compared to a profit of €4 million in the same period of 2005, with NIB spending €70 million on upgrading its systems in the meantime.

Andrew Healy, NIB's chief executive, said the bank had made "significant financial and operational progress" over the quarter.

The underlying performance was encouraging, with total lending increasing by 47 per cent to €4.9 billion and deposits up by 21 per cent to €2.96 billion. Total operating expenses at NIB amounted to €39.1 million over the quarter, including integration costs of €10.4 million. Last year's expenses were €7.9 million.

"Overall, our financial performance was in line with expectations," said Mr Healy. He expressed confidence about the future as NIB seeks to "clearly differentiate itself" from competitors in the market.

A breakdown of the lending result shows personal lending rose by 39 per cent to about €1.9 billion, while business loans grew 52 per cent to about €3 billion.

Much of the personal growth came from mortgages, which were ahead by 40 per cent. The bank claims that 60 per cent of its new mortgage business over the quarter came from customers switching from other banks.

Danske, NIB's parent, also said that the increase in lending at NIB had "more than offset" margin pressures created by "keener competition".

Kevin Gallen, deputy chief executive of NIB, said the bank's fixed-rate mortgage campaign had exceeded expectations in the first quarter. Later this month, NIB launches new mortgage products, with the market expecting an interest-rate cap - a cross between a fixed and variable rate, promising to never rise above a certain level for the life of the loan.

On the deposit side, personal accounts expanded by 13 per cent and corporate deposits increased by 32 per cent. The two combined fairly evenly to comprise total deposits of €2.96 billion.

Mr Gallen said the bank had received an encouraging response to its new range of personal banking packages, introduced last month. He said a large number of enquiries had come about NIB's post-SSIA account.

"Competition in financial services generally has certainly intensified," he said. The bank has 3 per cent of the retail market and 4 per cent of corporate business.

Danske said NIB's performance was "in line with expectations" for the quarter. The bank warned, however, that growth for this year at NIB was "likely only to match market growth", due to a staff "learning process" that will tie up resources over the next six months.

Danske exceeded expectations with group profits climbing by 147 million Danish crowns (€20 million) to 3.13 billion crowns.