Profits at NIB increase by 1.2% to £11m

A SHARP rise in bad debt provisions and a higher tax charge dimmed profit performance at National Irish Bank for the six months…

A SHARP rise in bad debt provisions and a higher tax charge dimmed profit performance at National Irish Bank for the six months to the end of March.

Pretax profits rose by only 1.2 per cent to £11.1 million, despite a strong increase in lending. Profits after tax fell 6.5 per cent to £6.6 million pulled hack by an increase in the effective tax to 40.3 per cent from 35.4 per cent.

Chief executive, Mr Philip Halpin said he was satisfied with the result in a very competitive environment. The rise in the bad debt charge to £745,000 from £169,000 was "a return to a more normal level compared with a very low level last year", he argued.

Lending growth led to an increase in the level of general provisions while specific provisions were increased from an exceptionally low level a year ago", according to Mr Halpin. That low level of specific provisions reflected good recoveries of amounts previously written off, he said, adding that the recovery level slowed marginally this year.

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He declined to reveal the general and specific provision figures, though he said the key component was general provisions. Asked if the increase in provisions reflected particular problems with a borrower, a group of borrowers or a sector, Mr Halpin said that provisions "were spread across a number of accounts and in a range of sectors".

Asked about the bank's performance in the credit card market, Mr Halpin said he was "very happy" with this area which he described as "excellent by industry standards".

Lending rose by 23.5 per cent, with net new loans of £194 million. The end March loan book of £1.019 billion brought NIB lending above £1 billion for the first time. Business lending, targeted as a significant growth area, increased by 37 per cent; personal lending was 20 per cent higher; while mortgage lending rose by 12 per cent.

Deposits rose by 16 per cent, or £150 million, to £1.074 billion. But the bank had to raise more funds on the wholesale money market to fund lending activities following the payment of a £36 million dividend to National Australia Bank in May, 1996, and because lending grew faster than deposits. Wholesale borrowings rose from £75 million to £210 million.

Net interest income improved by 3.6 per cent to £23.8 million. But margins slid from 4.22 per cent to 3.74 per cent, reflecting the dividend payment which removed £36 million of free funding, aggressive business lending at tight margins and a shift in deposits from demand to higher cost term accounts.

Non interest income rose by 10.5 per cent to £9.3 million, boosted by fee and treasury income. Total operating income was 5.4 per cent higher at £33.1 million while operating costs were 4.9 per cent higher at £21.2 million reflecting investment in the development of new products and services and staff training.

The cost/income ratio was marginally better at 64.2 per cent from 64.5 per cent. Operating profits before the bad debt provision increased by 6 per cent to £11.9 million.