Analysis: Anglo Irish Bank delicers better-than-expected results, writes Joane O'Sullivan

Anglo's new chief executive, David Drumm, has certainly remained faithful to the legacy of his predecessor, Seán FitzPatrick.

Yesterday, Mr Drumm delivered Anglo's usual pre-Christmas surprise to the markets in the form of better-than-expected full-year results, and promised more of the same in the years to come.

Business lending, which accounts for 80 per cent of its profits, continued its rapid expansion. In the past two years alone, Anglo's loan book has doubled. The other divisions, treasury and wealth management, also delivered healthy profits, while all regions performed well.

The bank insists asset quality remains strong, with non-performing loans accounting for just 0.5 per cent of the total. Neither the prospect of higher euro zone interest rates nor the prices for Irish property concern the bank.

Anglo believes its stress-testing of loans should allow it to withstand ECB rate hikes, just as its UK business has weathered the increase in interest rates.

As for the concern that Irish property prices have headed into unsustainable territory, Anglo notes that all its loans are backed by collateral while it always insists on proven, visible cashflow. "Markets go up and down in terms of value but irrespective of what happens in the property market, it's all about cashflow," says the bank's managing director, Tom Browne.

Anglo is targeting continued earnings growth of 15 to 20 per cent in the coming years. It sees scope for growth in its main markets, Ireland and Britain, where it has a market share of just 5 per cent, and the US, a huge market that it is building slowly.

To take advantage of growth opportunities, it is hiring and increasing infrastructure. The number of employees rose by 200 in the year ended September, on top of a rise of 140 the year earlier, and 2006 is expected to see further expansion.

The bank recently opened new offices in Birmingham and Manchester, while in the US, it opened a New York office. Despite this, costs remain tightly under control, with more than €70 of every €100 earned going straight to the bottom line.

Mr Drumm describes the bank's approach as "old-fashioned, traditional relationship banking", but it is a model that continues to prove very timely.