NIB profits up 51% despite cost of continuing investigations

National Irish Bank (NIB) has reported strong growth in 2002 although exceptional costs, including those associated with continuing investigations, made an impact.

NIB, part of the National Australia Bank group, achieved a 51 per cent rise in profits to €14.1 million in the 12 months to end-September. During the year the bank enjoyed good growth in business and mortgage lending with deposits also rising.

NIB chief executive Mr Don Price said he was pleased that the bank had continued to rebuild its franchise. "This is the first year we have been able to ringfence the investigations. The fact that our deposits have grown shows that the trust factor has been restored."

For the past four-and-a-half years, the bank has been embroiled in a series of investigations into overcharging of customers and the sale of unauthorised investment products. Mr Price suggests the legal fees and settlements have amounted to €40 million so far.

One investigation is still continuing under the direction of the High Court-appointed inspector, Mr Tom Grace of PricewaterhouseCoopers, and former Supreme Court judge Mr John Blayney. It is expected to be completed in the first half of 2003. Former bank staff named in that investigation are being allowed to examine the evidence against them. NIB expects to receive a copy of the evidence next year.

Meanwhile, the bank is continuing to deal with customers who have now settled their affairs with the Revenue Commissioners regarding offshore products they were sold by NIB staff. Financial settlements have been reached with 100 of the 470 customers affected. NIB has provided €18 million to cover these settlements and believes this amount will be adequate to cover its liabilities.

During the year, total lending increased by 7 per cent to €2.3 billion. Business loans were up 12 per cent while mortgage lending expanded by 13 per cent. The bank is still a relatively small player in home loans with less than 5 per cent of the mortgage market.

Customer deposits rose by 13 per cent, which reflected new business from the Government-backed Special Savings Incentive Account scheme and the introduction of an instant-access savings product.

The bank incurred exceptional costs of €8.9 billion including investigation costs of €2 billion and restructuring and reorganisation expenses of €6.9 billion.

Its bad debt charge was higher, in line with its expanded loan book. The bank insisted it was satisfied with the quality of its loan book.

The bank's sister operation, Northern Bank, reported a 13 per cent increase in pre-tax profits to £111 million (€174 million).