First Active growth gets a warm welcome

FIRST Active's declaration that core growth will increase by 20% this year drew positive responses from stockbroking analysts yesterday who recommended different tactics to shareholders.

First Active has been one of the star performers of the Irish Stock Exchange this year with the shares increasing in value by 65% in 12 months at a time when the overall value of the market has fallen by 27%.

Yesterday, the company said: "We expect growth in core operating profit before tax for the full year of approximately 20%."

Finance Director Michael Torpey, commented: "This growth reflects the continued strengthening and development of our core Irish business and demonstrates the value that has been created through our strategy of focusing on the Irish mortgage and savings markets."

Merrion Capital's Seamus Murphy said there is a possibility of the return of surplus cash to shareholders in the New Year and a possible takeover when the former mutual's takeover protection expires.

"All in all this is a reassuring statement from First Active. Although we continue to highlight its full valuation in absolute terms we maintain our buy recommendation on this stock given the likelihood of a significant capital distribution in early 2003 (circa 1 per share possible) and the prospect of corporate action on an 18 month view." Dolmen Securities Stuart Draper, who earlier this year rated the stock a buy with a 5.40 target, has downgraded the stock to a hold.

In a note to clients yesterday Mr Draper said: "This price target of 5.40 was recently achieved, we downgraded our recommendation for First Active from buy to hold, and following the trading statement we re-iterate our hold recommendation, recommending a switch into Irish Life and Permanent (10.94) as providing more value at current levels amongst the Irish mortgage lenders. First Active's share price had risen by 26% since our buy note of 25/07/02."

The main elements of First Active's pre close period trading statement, before they announce their results to the end of December on January 28 next, were:

Net loan growth of low double digit in 2002 expected with gross advances in mortgages running at high single digit percentages.

Margins remain stable at 1.43% according to First Active.

Other income remains in line with forecasts but management do point to the weaker life market in the second half of 2002.

Costs are expected to grow at a level no greater than general inflation.

Asset quality remains strong.

First Active also disclosed it had experienced a very robust performance throughout its branch network with its expected growth coming close to 40% in gross new advances in the year.