IL&P is expecting profits in excess of 10% for 2004

Irish Life & Permanent expects to post double-digit profit growth for 2004, boosted by strong new business volumes in both life assurance and banking.

The continued strong performance of domestic residential mortgages will also drive numbers ahead, according to a pre-close trading update released by the group yesterday.

Irish Life & Permanent chief executive Mr David Went said the group was either improving its market position or holding its own in all areas.

Mr Went acknowledged that annual growth in residential mortgage lending had slowed a touch over the past few months, but he said that this was due in part to a high lending base in 2003.

He pointed to a full-year group outcome in line with expectations. Most analysts judge that group profits have grown by a double-digit percentage this year.

Irish Life & Permanent said the strong economy, and in particular, a buoyant labour market, had supported good demand for its products.

Mr David Odlum, banking analyst with NCB, yesterday noted that the group was probably the purest investment play on the Irish economy available in the financial sector. The group draws 90 per cent of its profits from the Republic.

Mr Odlum described the statement as "bullish".

Irish Life & Permanent addressed concern over margin compression by observing that the worst appeared to be over on the banking side of its business. On the life side, margin pressures will be "more than offset" by "scale and strong cost control", according to the update.

The group expects banking margins to fall from 1.63 per cent for 2003 to about 1.4 per cent.

This will reflect the full impact of the last European Central Bank rate reduction, and higher levels of wholesale funding taken out to support a greater volume of loans, the group noted.

Gross new lending for 2004 is forecast to be ahead by 30 per cent on last year. The residential mortgage aspect of this is to be "particularly buoyant", with gross new home-loan business to approach €5 billion - up by almost a third on 2003.

The group's British mortgage business, Capital Home Loans, has also experienced "exceptional growth", according to the update.

The overall lending book is expected to have grown by more than 20 per cent to €20 billion by the end of the year.

On the life side, Irish Life & Permanent said it was on course to report good growth in both retail pension sales and its savings and protection business. Continued weak retail investor confidence in equity markets has weighed on investment bond sales, however.

The group's corporate life and fund management sections are both due to deliver solid growth, the statement said.

Irish Life Investment Managers brought in €1.5 million new institutional money over the year, 20 per cent more than in 2003.

Group finance director Mr Peter Fitzpatrick said he expected costs to come in lower for 2004 than in 2003, despite a 6 per cent rise in wages.

He also confirmed that the group would seek to cut costs by reducing its headcount over the next 18 months as part of long-term integration plans. Any redundancies would be voluntary in nature.

Shares in Irish Life and Permanent firmed on the release of the update, closing 10 cent stronger at €13.65.