Economy buoys strong growth in Irish Life results

FINANCIAL services group Irish Life & Permanent has indicated very strong growth in mortgage lending for 2004.

It has also done well across the full range of its life assurance operations and overall is forecasting results for the year in line with market forecasts.

The projected profit figure for the year is between €375million and €388m before tax implying a 4% to 5% growth in earnings per share.

It notes the strong positive economic environment has been a factor.

In its trading statement the group, which is one of the biggest players in the mortgage and life and pensions markets, says gross lending for housing will be close to €5 billion, or €3bn net.

New business volumes in both life assurance and banking business are up strongly on 2003, the group said.

Gross new lending will be up 30%, buoyed by the strong demand for mortgages.

At the year end total lending will stand at €20bn, an increase of 20% year on year.

Ireland continues to be particularly buoyant, with expected gross new lending of just under €5bn for the year.

Capital Home Loans, the group's British mortgage company, did well also with a 40% rise in lending in that market.

Other lending, taken together, is expected to show double digit growth, the statement said.

Life sales in Ireland have done well and the pensions division is likely to be up by about 30% over 2003.

Savings and protection business should also fare well in the overall performance. Lack of confidence in shares must still be considered a factor and bond sales will be down.

Fund management business from institutions rose 20% to €1.5bn, boosted by better investment performance.

The margin for the full year is expected to be in line with previous guidance, at around 140 basis points. This is down from 163 basis points for the full year in 2003, reflecting the full impact of the last ECB rate reduction together with the impact of increased levels of wholesale funding to support the 20% growth in loan balances.

The group will also have brought its costs lower for the year, improving the cost base further.

A strong economy and, in particular, a buoyant labour market, provide a positive backdrop for both banking and life businesses, supporting good demand and volume growth.

The worst of the margin compression in the banking business would appear to be over and this will help net interest income growth.

In the life business, the group plans to continue to use scale and strong cost management to more than offset any margin pressures.

In Dublin the share price was up a modest 5 cent by mid afternoon at €13.60.

Earlier this week the group announced it is to pay back 1,500 mortgage customers roughly €400 each after an administrative error.

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