Profit hike at IL&P beats forecast

IRISH LIFE & Permanent (IL&P) beat market expectations yesterday when it reported first-half pre-tax profits of €192 million.

The results were 15% ahead of last year’s figures, stripping outing exceptional items, which included a €26 million boost that was not repeated this year.

Chief executive David Went said the results were very satisfactory. Profits from the group’s life assurance division rose by 8% to €105 million, while banking operations delivered €56 million, a 14% increase excluding exceptionals. Its interest in home and motor insurer Allianz Ireland brought in first-half profits of €25 million, €9 million more than the same period last year.

Mortgage lending continued to surge ahead, with the total value of new home loans up 41% on the first half of 2003 at €2.2 billion. IL&P was owed a total of €13.2 billion by Irish homeowners at the end of June.

Mr Went said the group had done well from the record number of new house completions and predicted that up to 80,000 new homes would be sold in the current year. 17% of new mortgage lending was for investment properties, a figure which Mr Went said was higher than in previous years.

But the group continued to suffer the pain felt by most mortgage lenders arising from the record low interest rate environment. Its net interest margin, the difference between the price it pays for money and the rate it charges to borrowers, fell from 1.63% to 1.44%. Finance director Peter Fitzpatrick said this figure would fall further to 1.40% for the full year.

The margin squeeze arose when the group passed on interest rate cuts to borrowers by charging lower lending rates, but it could not reduce the rates paid to depositors to the same extent, as they were already close to zero. Falling interest rates have cost the group €50 million over the past two years.

Mr Went said the life assurance division had performed strongly and delivered a 22% increase in earnings from new business. This compared with an average increase across the industry of approximately 12%. The group also did well in the market for Personal Retirement Savings Accounts (PRSAs) and has signed up 9,000 customers, accounting for 30% of the market.

There was also good news for shareholders on the costs front, as the group restored its cost base to 2001 levels. The pressure on margins had increased its determination to manage costs aggressively.

Mr Went declined to rule out buying National Irish Bank if its Australian parent were to put it on the market. He said IL&P had been following developments with interest and would examine the opportunity if it arose, but would not comment further.

The group also said that it had appointed O2 Ireland chief executive Danuta Gray as a non-executive director. Mr Went and chairman Gillian Bowler spent approximately €100,000 and €190,000 on IL&P shares following the announcement of the results.