There was a strong response yesterday to a report showing the two main Irish banks made almost three times more money per customer in 2003 than the average European bank. Colm Keena reports.

The report by JP Morgan said AIB and Bank of Ireland operate a duopoly in the Irish banking sector. It found that AIB topped the European league for profit per customer. The bank made €344 per Irish customer in 2003. Bank of Ireland came second, with €339 per customer, according to the report.

The figures for the Irish banks were more than €100 per customer ahead of their nearest peers, and almost three times the European average (€123).

"The Irish banking market is effectively a duopoly with Allied Irish Banks and Bank of Ireland having substantial market shares across a wide range of banking products," the report said. "We believe their dominance in the domestic market is reflected by the fact that both banks have circa 70 per cent penetration in current accounts."

The report estimated that AIB made €693 per mortgage customer in 2003 and Bank of Ireland €707 - both more than three times the European average of €221.

Consumers Association of Ireland chief executive Mr Dermott Jewell said he hoped the report would encourage Irish consumers to demand better bank rates and to shop around.

Fine Gael's finance spokesman, Mr Richard Bruton, accused the Irish banks of making "super profits".

"There is no excuse for the current uncompetitive situation... Other jurisdictions have taken a much more vigorous response in defending the rights of consumers," he said.

Labour party finance spokeswoman Ms Joan Burton also called for action. "The banking sector has been creaming off excessive levels of profits," she said.

ISME, the small and medium-sized enterprise association, said the report confirmed what "the dogs in the streets have known for years". It said that SMEs were "target number one" for the banks.

However, the two main banks questioned the quality of the report.

Mr Alan Kelly, head of investor relations with AIB, said the report was flawed in that it used post-tax profit figures, which it then divided by each bank's estimated number of customers. This meant the benefit of the lower tax rates in Ireland were distorting the report's findings. If pre-tax figures had been used, the difference between the Irish banks and others would have been much "flatter".

"We are a profitable bank and we are proud to be a profitable bank," he said. He said AIB had good productivity and was working in the best-performing economy in Europe. "We should be the most profitable."

He said the study was a limited, "blunt" study that should not be considered comprehensive. It did not take account of a bank's use of capital and was often not comparing like with like. He cited the varying customer profiles of the banks examined as an example of this.

Mr Kelly said the Irish clearing banks had been shown to have a profit margin on domestic products of 2.2 per cent. This compared favourably with the UK clearing banks, where the comparable figure was more than 3 per cent.

A spokeswoman for Bank of Ireland said the report involved a lot of estimates and assumptions. A survey based on real figures conducted by the Irish Financial Services Regulatory Authority had found Irish mortgages were good value when compared with prices elsewhere, she said.