Dolmen Securities analyst Stuart Draper, in a trading note to clients, said: “Given the strong year on year recovery currently taking place in life and pension sales, as well as the buoyant state of the Irish mortgage market, this trading statement is likely to be very upbeat and could act as a positive near-term catalyst for the share price.”
Mr Draper recalled that in March, IL&P reported operating profits before tax of €363.7m, a year-on-year increase of 4%.
“This result showed that a meaningful recovery in life and pension sales started to take place in the second half of 2003, with combined retail and corporate life sales showing 15% growth in H2 2003 on H1 2003. All of the indications so far this year are that this recovery has continued strongly into 2004,” he added.
Mr Draper said that as IL&P is the largest mortgage lender in the Irish market, it continues to profit strongly from this market’s very strong lending growth levels.
“Such lending growth accelerated in H2 2003 and continues to more than offset the margin attrition implied by the current low interest rate environment in which greater wholesale funding is required.”
Mr Draper said that the €29m in cost savings being generated from the full integration of the TSB Bank merger are also likely to help keep IL&P’s 2004 costs similar to those in 2003.
Dolmen have a month price target for IL&P of 14.50, a 15% further upside for shares.
“Investors will also be paid a dividend yield of 4.3% for waiting for this upside to be realised,” Mr Draper said.
In a recent presentation to investors, IL&P chief executive David Went, said that the company is now working on a second phase of cost reduction by focusing on back office processing and investment in self-service technology in the branch network.
“This will be rolled out through 2004 and will, when completed, generate another €10m to €15m of cost savings,” he added.