Bank of Scotland (Ireland) continues strong run as profits soar 20% to €71m

BANK OF SCOTLAND’S Irish division continued its impressive run yesterday as it announced pre-tax profits of €71 million for the six months to June, a 20% increase on the same period last year.

The unit’s lending book grew by 60% to €14.7 billion, but the €9bn increase was partly down to the transfer of the bank’s Irish home loan business, worth almost €3bn, from Edinburgh to Dublin. Customer deposits were 30% higher at €6.9bn.

Bank of Scotland (Ireland) chief executive Mark Duffy said all areas of the bank had contributed to the strong numbers and that the favourable patterns seen in 2004 had transferred into the current year.

“The outlook for the remainder of 2005 is very positive, with a strong pipeline of business and economic factors continuing to support robust growth in our chosen markets,” he said.

Mr Duffy was also upbeat about the future, which will see the bank enter the Irish retail market towards the end of the year after its acquisition of the ShopElectric chain of retail outlets from the ESB.

The deal gave it over 50 locations dotted around the country, but the bank later said only around 30 of these would be suitable for conversion to bank branches.

Mr Duffy said these new branches would offer “genuine competition to the existing players for the first time.”

But there was bad news on the costs front, as the cost/income ratio, a key measure of bank profitability, ticked up from 40% to 43%. This meant that, for every €100 in income received by the bank, €3 less went to the bottom line.

There was also a negative trend in the division’s net interest margin, which measures the difference between the average price paid for money and the rate charged to borrowers. This fell from 2.06% to 1.8% but was driven by a change in the business mix.

The bank’s parent, HBOS, reported half-year profits of £2.26 billion (€3.28 billion) yesterday. This was 15% ahead of last year.