First Active to beat forecasts

INTERIM RESULTS: First Active expects to report growth of around 30 per cent in earnings per share (EPS) for the first half of the year when it releases interim results on July 25th.

It said this reflected increased activity in the residential mortgage sector, boosted by Budget tax changes that drew investors back into the market, and a steady performance in commercial lending.

The group reported EPS of 13.7 cents in the first half of last year, leaving it on track to report EPS of around 18 cents for the current six-monthly period, ahead of analysts' expectations.

Company broker Davy Stockbrokers said the growth prediction was around 5 per cent ahead of its own estimate and it was upgrading its forecasts for the full year as a result.

Mr John Kelly, analyst with NCB Stockbrokers, said achieving 30 per cent earnings growth in the current climate was a "terrific result".

"Management is doing a fantastic job. It is getting revenue growth but controlling costs," he said.

The news failed to lift the share price, however, and the stock closed unchanged at €5.20.

First Active said its branch network had enjoyed a 50 per cent increase in gross new mortgage advances, although business carried out through its broker channel continued to decline in line with the increased emphasis it was placing on branch distribution.

Overall, it expects low single- digit growth in gross new advances over the same period last year while commercial property advances are expected to be level with the first half of 2001.

Total loan book growth is expected to be in the high single digits on an annualised basis.

First Active also expects strong growth, in the low teens, in other income because of the increased focus put on fee-income generation. The increased lending through the branch network has allowed it to gain more of the add-on sales, such as life and home insurance, that go with mortgages.

Margins had remained constant, at around 1.4 per cent, in the period, the company said, while net interest income had benefited from the stable interest environment in the first half.

It said cost control remained a priority and it expected a reduction of costs in real terms in the first half. It had a cost/income ratio of 61.4 per cent in the first half of last year but this is expected to fall this year.