B of I 10% profit rise beats expectations

Bank of Ireland has reported a 10 per cent increase in pre-tax profits to €602 million in the six months to the end of September and has signalled a strong full-year performance.

Announcing the better-than-expected results yesterday, chief executive, Mr Michael Soden, said the bank is committed to growing its revenues and containing costs and is on track to deliver a satisfactory result for the year.

"We see good momentum in our businesses and given normal market conditions we believe that the outlook for the year is satisfactory."

The bank, which recently failed in its bid to take over the UK Abbey National Bank, says it is focused on adding smaller acquisitions to expand its operations in the British market and is not searching for another large potential acquisition.

Mr Soden did not rule out making another large-scale bid, though, if the right opportunity presented itself.

He defended the rationale for the bank's overtures to Abbey National and stressed that this had not diluted its commitment to its core strategy for growth. "I have no apologies to make for our perfectly legitimate aspirations to achieve quantum growth through a transformational transaction such as Abbey National. Transformational opportunities of such potential are very rare."

The bank's performance came in ahead of market expectations although its shares slumped. The shares, which had traded higher ahead of the results, closed 20 cents lower at €11.20 in Dublin. Mr Soden said he believed this was more a reflection of the volatility in the markets than a reaction to the bank's interim figures.

Shareholders will receive an interim dividend of 13.2 cents per share, an increase of 14 per cent on last year, on the back of the group's performance.

Earnings per share, excluding goodwill and exceptional costs, amounted to 49.9 cents, up 11 per cent on the same period last year.

Mr Soden said the group would continue to monitor its surplus capital and could consider undertaking a share buy-back or to distribute these funds through a higher dividend payment to shareholders. This would only happen if the bank believed this to be the best use of capital for its shareholders, he said.

"We also have a duty to hold out to our shareholders the prospect of continued growth and will continue our search for prudent and profitable acquisitions that will leverage our skills and strengthen our franchise in our various markets." The bank will primarily consider acquisition opportunities in the UK that bring additional skills to the group in a price range of between €100 million and €2 billion, he said.

During the six months the bank incurred exceptional costs of €22 million, including €9 million as a result of its termination of a joint venture with the information systems group Perot and the sale of Active Business Services.

Its operations in the Republic continued to deliver large profits for the group although its life and asset management businesses were affected by the weakness in world stock markets. Profits at the bank's UK business rose by 14 per cent in line with brokers' expectations.