First Active has reported modest growth in 1999, with pre-tax profits up 5 per cent to €46.8 million (£36.9 million). The former building society, which admits 1999 was a very difficult year, insists the continuing growth in its business shows it can compete in highly competitive markets and is confidently looking to the future.

While the results were slightly ahead of market forecasts, First Active shares closed lower in Dublin yesterday. The shares, which improved ahead of the results, closed at €2.55, down two cents.

Shareholders will receive a final dividend of 10.5 cents per share, which is equivalent to a 9 per cent increase. The bank's chairman and acting chief executive, Mr John Callaghan, said First Active had ended its first full year as a public company in a strong position. It is implementing a cost-cutting programme and has secured the loss of 175 jobs and the closure of 25 of its 75 branches at a cost of €25.4 million. It estimates the restructuring will yield annual cost savings of €13 million. The full cost of that programme is contained in the 1999 accounts.

New lending during the 12-month period rose to record levels of €2.2 billion. The bulk of this was advanced in the Irish market with some €786 million lent out through its centralised mortgage operation in Britain. First Active says it increased its share of the highly competitive Irish mortgage market from 12 per cent to 16 per cent last year and is seeing continuing strong growth in the first two months of 2000. Mr Callaghan said it saw no basis for concerns about overheating in the Irish property market and was satisfied about the quality of its new lending.

The bank, which was viewed as being among the most vulnerable to the entry of aggressive foreign competition into the Irish mortgage market, did suffer a fall in new lending profit margins. The arrival of Bank of Scotland last summer with a mortgage offering of almost one percentage point below prevailing market rates forced all of the Irish institutions to cut rates for new borrowers in the second half of the year. Over the full year, First Active maintained a new lending profit margin of 1.1 per cent, although this did dip below 1 per cent in the latter part of the year.

The bank has achieved growth in higher-margin commercial and personal lending. Deposits also increased, rising by 7.6 per cent to €111.1 million.

Some 47 per cent of its lending was funded from customer deposits, down from 61 per cent in the previous year. A further 14 per cent came from credit institutions and 31 per cent was financed by mortgage-backed securities.

The Irish operations generated €32.9 million of group pre-tax profits with some €15.7 million contributed by its specialist mortgage business in Britain.

At the end of 1999, First Active had €8.1 billion under management, a rise of 24 per cent on 1998. Operating costs were higher, rising by 4 per cent to €94.1 million. Its cost/income ratio was fractionally improved at 63.4 per cent but this is still high and the bank has indicated it aims to reduce this ratio to the mid-50s by 2002.