Bank of Scotland (Ireland) posted a 28 per cent increase in pretax profits to €272 million in 2007, as loans to customers through its expanding Halifax branch network rose 31 per cent to €8.9 billion and deposits increased 11 per cent to €9.7 billion.

Loans to its business banking customers increased 24 per cent to €20.9 billion. The bank said it attracted 72,000 new customers in 2007, in addition to the 44,000 customers recruited in its first year of operation. The bank has opened 40 Halifax branches and plans to open another six in 2008. It recruited 548 staff in 2007, bringing its workforce to 1,728.

The bank said it was attracting one in every four customers switching credit cards, one in every four moving current accounts and one in every six moving their mortgages.

Mark Duffy, chief executive of Bank of Scotland (Ireland), said a third of the former ESB shops, acquired by the bank in 2005, had been turned into branches. He said the bank planned to announce another "substantial division" in the coming weeks that will challenge the two main banks, AIB and Bank of Ireland.

Mr Duffy said the business banking division was "not a one-trick pony"; property accounts for 56 per cent of its commercial loan book, with some 11 per cent of the bank's loans provided to the construction sector.

Chief operating officer Richard McDonnell said he had no concerns about loans to builders, despite the property downturn; just 0.08 per cent of development loans were impaired, he said. "We look at our portfolio intensively four times year a year, so we are very tight with our management of that portfolio."

The bank's bad debt charges had fallen to 0.12 per cent of its loans in 2007 from 0.2 per cent a year earlier, although chief financial officer Tom FitzGerald said he expected this to rise in line with the growth in the bank's loans. Mr Duffy said the bank had avoided speculative lending on property. "We have consciously missed that party because others, frankly, were doing more at risk levels that we weren't comfortable with."

Mr Duffy said the bank expected moderating economic conditions in 2008. "It is a much tougher operating environment and it will continue to be", but the bank was "out of the areas we want to be out of - the hotspots".

The bank said it had a healthy pipeline of new business, with €3.3 billion in commercial loans approved but not yet drawn, an increase of 20 per cent on 2006.

Mr Duffy said the bank was "a contrarian lender" and although parts of the economy would be moderating, segments would present investment opportunities.

Shares in the bank's parent, HBOS, fell 6.8 per cent to 657p after the Edinburgh-based bank said the outlook was "uncertain". Earnings for the second-half of 2007 fell 8.9 per cent to £1.93 billion (€2.5 billion).