Profits at Irish banks will rise significantly next year following the removal of the bank levy, according to broker NCB.

The broker has upgraded earnings forecast for the four listed Irish banking groups on the assumption that the Government will not attempt to extend the €100 million per annum levy, which was introduced in 2003.

"The three-year levy is due to finish at the end of this year and we don't now expect it to be renewed," analyst David Odlum writes in a note to clients.

Irish Life & Permanent will be the principal beneficiary for such a scenario, with Mr Odlum expecting the levy's removal to boost previous profit projections by 3.5 per cent to 137.5 cent per share.

NCB expects AIB, which pays the most significant sum annually under the levy, €30 million, to report earnings per share of 158.5 cent next year, 3.3 per cent ahead of previous guidance.

Bank of Ireland will see a 1.9 per cent benefit from the levy's removal to report profits of 140.9 cent per share in the 12 months to the end of March 2007.

Anglo Irish Bank, which pays just €5 million a year towards the levy, can expect to see a 0.8 per cent increase in earnings per share from previous guidance to 80.2 cent, NCB says.

The levy was introduced by former minister for finance Charlie McCreevy.

Mr Odlum described it as "blunt and arbitrary", adding that continuing it would "send a poor message to the international investment community and our EU partners".