The costs associated with the aborted merger with TSB Bank helped to depress profit growth at ACC Bank in 1999.

The State-owned bank achieved pre-tax profits of £19.3 million (€24.5 million) compared with £20.5 million (€26.3 million) in 1998 after what chairman Mr Padraic O'Connor described as a "turbulent" year.

The bank is now implementing a radical restructuring plan which will include job losses, the closure of Dublin branches and a switch out of low-margin banking operations.

The out-turn excludes the £2.5 million in costs incurred as a result of the lengthy merger negotiations with TSB Bank which collapsed in January. And, in line with the other financial institutions, ACC has not made a specific provision in its accounts for any liability to the Revenue Commissioners for unpaid Deposit Interest Retention Tax (DIRT) arising out of the Public Accounts Committee investigation into bogus non-resident accounts.

ACC is expected to face a hefty bill from the Revenue Commissioners. Based on the findings of the Comptroller and Auditor General's report into DIRT evasion for the Inquiry, ACC's potential tax liabilities could lie between £1.5 million and £17.5 million, although these figures do not take account of interest and penalties which may also apply.

Mr O'Connor said the Revenue audit is continuing within the bank and until this is finalised the bank is left in a very unsatisfactory position. He rejected the DIRT estimates in the Comptroller's report as "totally spurious and without foundation. We don't know what our liability will be but hopefully we will have been put out of our agony by the end of the year". The bank reported a 16 per cent rise in new lending last year, with loans to personal customers at £456 million, while advances from its corporate and commercial division were £235 million. At year-end, total advances stood at £1.8 billion, up 11 per cent.

Its net income margin - its earnings on loans and deposits - increased by 8 per cent to £58.8 million. Net interest margins were marginally weaker at 2.48 per cent compared with 2.52 per cent in 1998.

Outside of its core banking business, the bank earned £9.3 million from income on insurance, treasury and other financial services, up 32 per cent. Profits from the trading and sale of investments was £2.8 million. Costs continued to rise, with administrative expenses up 7.7 per cent to £43.5 million pushing its cost income ratio higher to 65.9 per cent, one of the highest in the Irish banking sector.