Annual profit rises 26% to £30m at Anglo Irish Bank

Good business growth in a strong economic environment helped Anglo Irish Bank generate a 26 per cent rise in pre-tax profits to £30.3 million for the year to the end of September.

Good profit growth was achieved, despite a 30 per cent increase in bad debt provisions - up from £8.6 million to £6.6 million - and the absence of any once-off gains. But the bank received the benefit of sterling strength when it translated its UK profits into pounds. Anglo's chief executive, Mr Sean Fitzpatrick, said the bank was confident it would achieve its "demanding targets" for 1998 and would continue to strengthen its market position by expanding its customer base. He outlined Anglo's targets: a 20 per cent return on shareholders funds in the short term from the current level of 17.8 per cent and a doubling of the balance sheet over the next five years which would involve compound annual growth of 15 per cent.

Other targets include growth of 15 per cent per annum in earnings per share and a reduction in the cost income ratio from 43.6 per cent to 40 per cent over the next two years. Anglo would expand through a combination of organic growth and suitable acquisitions, he said. ICC Bank would be a "good fit" for Anglo if it came on the market, Mr Fitzpatrick commented. Anglo will not expand outside its existing core business but expand its revenue base in Ireland and the UK by adding new products including treasury and investment services, trade finance and invoice discounting, he said.

Commenting on speculation that Anglo may be a takeover target for foreign banks interested in taking a foothold in the Irish market, finance director Mr Wille McAteer said that the bank had received no approaches.

"If we get an approach we will deal with it. Foreign banks are leaving the Irish market because it is too small. But our plan is to grow and to deliver value to our shareholders. We are interested in suitable acquisitions."

Mr Fitzpatrick attributed last year's profit growth mainly to a "focused strategy" and pointed out that the profits growth was entirely organic with no contributions from new acquisitions. Anglo increased its share of its niche banking market - business loans in a £100,000 to £5 million range - from 8 per cent to 10 per cent in a growing market, Mr Fitzpatrick said.

Asked why the bank raised its bad debt provision by 30 per cent in a strong economic environment, Mr Fitzpatrick said it reflected the increase in lending as well as "prudence" in advance of the next economic cycle. "Our book has never been so healthy. But we are saying what if. . . we are being prudent because the downturn will come though it is probably some years away." Non-performing loans of £40 million were 111 per cent covered by total provisions of £44.3 million. Total income was 22 per cent higher at £69.1 million. Net interest income on core business was 29.6 per cent ahead at £55.1 million while fees and commissions income rose to £12.7 million from £11.3 million. About 50 per cent of fee income came from arrangement fees on loans.

Other income - which included profits on sales of Government bonds and once-off gains - was down to £0.9 million from £2.6 million. This reflected the once-off gain of £0.7 million on the sale of the Ansbacher building in the previous accounts. Costs were 15 per cent higher at £28.4 million.

Total assets increased by £748 million, or 31 per cent, to £3,144 million helped by a 39 per cent growth in lending to £2,021 million. Some £67 million of the £565 million rise in net lending came from the currency gain on translation of strong sterling into Irish pounds. At 2.9 per cent, Anglo's net lending margin was barely changed from 2.95 per cent.

Deposits from customers, banks and debt securities increased by £626 million, or 30 per cent, to £2,708 million helped by a surge in Special Savings Accounts. With liquidity of 40 per cent, the bank could be described as underlent.

But Mr Fitzpatrick argued it meant Anglo was in a strong position to increase future lending and to further enhance shareholders funds. Profits after tax rose 30 per cent to £24.2 million, while earnings per share were 15 per cent higher at 8.6p. Shareholders will get a 16 per cent increase in the final dividend to 2.55p per share, bringing the total annual dividend to 4.2p per share, an increase of 13.5 per cent.