Irish Nationwide profits climb 5% on strong lending

A STRONG increase in lending and stringent cost containment led to a 5 per cent rise in profits at Irish Nationwide Building Society to £22 million last year.

The society's managing director, Mr Michael Fingleton, said that prospects for this year were "very encouraging". He expects house prices to rise by 10 per cent during the current year. This, together with an expansion of loan volumes, should lead to "an improvement in pre tax profits" in the current year

He added that the society would not exclude any options when it came to its mutuality status. "Mutuality is a concept which is still relevant but not to the exclusion of other options," he said.

However, he called for the Government to make a clear statement on the future of TSB and the State owned ICC and ACC banks.

"This has been on the cards for over a year. We should have heard something by now," he said. "A statement should be made, not least from TSB's and ACC's point of view.

Irish Nationwide has said it would be interested in making a bid for ACC Bank, if its bid for TSB falls through. Last year, Mr Fingleton said the society would convert to a publicly quoted company within three years if it was successful in acquiring TSB.

The group advanced £154 million in new loans during 1995, up 28 per cent from a year earlier. After redemptions are taken into account, net new loans were £96 million.

Mr Fingleton said he was very pleased with the results, despite the continuing intense competition in the core areas of the society's operations.

However, he warned that margins will be hit as competition intensifies. "We believe that competition will continue to intensify to the detriment of margins but we accept the inevitability of this and we are more than confident of meeting the challenge," he said.

Irish Nationwide's performance was helped by its low cost/ income ratio compared with the other societies.

The rise in the ratio to 34 per cent, from 32.5 per cent the year before, was mainly due to an increase in total management costs of 9 per cent to £11.8 million from £10.8 million in 1994. "This was basically the cost of developing more branches and the head office," Mr Fingleton said.

Higher lending volumes boosted pre tax profits. This was partly offset by increased competition for attracting both deposits and lending business, which served to squeeze margins.

Bad debt and depreciation charges were down. Provisions for bad debts fell to £1.8 million from £2.2 million.

Reserves stood at £119 million at the end of 1995, with a net surplus after tax transferred of £15.8 million. Irish Nationwide recorded a return of 20 per cent on average reserves.

Total balance sheet assets in creased by 16 per cent to £961 million with a pre tax return on average assets of 2.6 per cent.

Mr Fingleton added that he expected interest rates and inflation to hold at present levels at least until the end of the year. This was despite some negative signals from the US, he said.