Bank of Ireland has signalled a solid performance for the year to the end of March 2003, although it has estimated that weak investment markets will knock around €40 million off its life assurance profits.

In a trading statement issued to the Irish Stock Exchange yesterday, the Republic's second-biggest bank said it expected to report mid single-digit growth in pre-tax profits and earnings per share when it announces its full-year figures in May.

Analysts were broadly impressed with the statement, although most were preparing to reduce their forecasts to reflect weaker earnings from stock markets.

Notwithstanding the upbeat statement, Bank of Ireland shares lost 31 cents to €9.87, moving lower in line with the market.

The bank has disclosed that it will use €35 million from its loan loss provisions to write off bad debts in its wholesale and retail loan books.

Some €23 million will be drawn from its non-designated specific provision to write off debts in its wholesale lending book.

The bank said most of the loan write-offs were for less than €10 million and arose across a range of businesses and sectors. A further €12 million has been used to write off bad debts in its retail book.

The bank said this followed the centralisation of its lending operations and a "tidying up" of its book.

The bank will still have more than €140 million of these provisions after this write-off and has stressed that this does not signal any material deterioration in the quality of the assets on its loan book.

It said the loan loss charge and arrears balances were broadly in line with March 2002, when calculated as a percentage of the overall loan book.

The bank expects the sharp decline in equity markets will reduce profits in the life assurance sector by €40 million.

The figure was calculated based on stock market values on March 21st and the actual figure may change depending on further volatility.

Its asset management business, which includes Bank of Ireland Asset Management (BIAM) and Iridian, have been affected by the sustained weakness in global equity markets.

The bank has said that the financial impact of these declines has been mitigated in part by revenues arising from the high levels of new business generated by BIAM and the tighter control of costs.

According to the statement, Bank of Ireland's total income will increase by a low single-digit percentage.

Strong volume growth helped to support higher net interest income, which is expected to rise by a double-digit percentage.

Other income, such as fees and commissions, will fall by a mid single-digit percentage, principally caused by the downturn in world equity markets.

Commenting on asset quality, the bank said its loan book remained strong despite the various adverse corporate and economic developments during the year.

In the Republic its core business is on course to deliver a strong performance with a mid-teen percentage growth in pre-tax profits.

Mortgage lending continued to drive growth, with other customer lending slowing. The bank expects mid single-digit growth in total income.

The bank's UK financial services division, which includes Bristol & West, is expected to show low double-digit percentage growth in pre-tax profits before exceptional items associated with the rationalisation of its business.