Strong contributions from new acquisitions and non-core operations helped Bank of Ireland increase pre-tax profits by 34 per cent to £530.4 million for the year to the end of March.

But profits from the retail division branch banking in the Republic, Northern Ireland and Britain as well as the ICS building society, Bank of Ireland Finance, credit card and other services were marginally ahead at £207.6 million from £204.4 million.

The Bristol & West Group comprising the Bristol & West Building Society, which was acquired in July 1997 for £600 million sterling and Bank of Ireland Mortgages chipped in profits of £92.3 million. This was up from the previous year's Bank of Ireland Mortgages contribution of £13.6 million.

Life assurance operations made up of the bank's Lifetime subsidiary and New Ireland, which was acquired in December 1997 for £274 million contributed £42.9 million up from £12.8 million. The bank's US strategic investment its 23.5 per cent stake in Citizens bank made a contribution of £55.5 million, up from £35.3 million. The corporate and treasury division produced strong profits at £84.1 million, up from £73.9 million.

The result for the retail division was complicated by increases in costs and a rise in the bad debt provision. Pre-tax profits only rose by 1.6 per cent to £207.6 million. Division income rose by 12.8 per cent including a 10.7 per cent increase in net interest income, with the rise in lending volumes more than compensating for a further tightening in net interest margins. Group net interest margins dropped from 3.7 per cent to 3 per cent. Group lending rose by 23.9 per cent, helped by strong demand against a favourable economic background. Deposits and investments rose by 15 per cent. During the year, the group incurred exceptional costs of £22 million to fund preparation for the year 2000 and £3 million in preparation for Economic Monetary Union. Most of these costs came in the retail divisions, depressing profits.

Overall, group operating expenses increased by 28 per cent to £702.4 million. But the group said that, when the costs associated with acquisitions during the year and the Year 2000 and EMU costs were excluded, the underlying rise was 10.7 per cent. This compared with an underlying rise in income of 15 per cent after contributions from acquisitions were excluded. In addition, the group increased its non-designated loan loss provision fund by £27.4 million to £69.4 million, pulling back profits in the retail division.

All the divisions generated strong profits for the year. But there were some gains boosting the results which are unlikely to recur. These included: a gain of £12 million from the sale of New Ireland equity holdings; a £10.9 million gain at Lifetime, mainly from the release of earlier provisions in Britain; and the sale of software. In the corporate and treasury division, treasury operations benefited from currency volatility in advance of EMU.

A breakdown of the pre-tax returns on total assets shows that the return from the retail division fell to 1.58 per cent from 1.87 per cent reflecting the increased costs and provision. The return from the life assurance divisions was 1.52 per cent from 1.53 per cent while that from the Bristol & West Group rose to 0.65 per cent from 0.56 per cent. Corporate and treasury produced a 1.2 per cent return down from 1.68 per cent while the return from other group activities was down to 2.77 per cent from 6.85 per cent.

At year-end, the bank was in a strong position for further expansion with strong capital ratios at 11.3 per cent for total capital and 7.2 per cent for Tier 1.