Bank of Scotland Ireland (BOSI) is promising an assault on the current account market by offering a "meaningful" rate of interest on accounts it will launch later this year.
"It has to be meaningful to make people switch," said Mark Duffy, chief executive of the bank. Mr Duffy was speaking as BOSI reported 20 per cent profit growth for last year. He accused other banks of "discriminating" against their customers by not paying interest on current accounts.
The practice has never become established in the Republic, even though it is standard in the UK.
Mr Duffy also hinted that BOSI would launch its own insurance products in the Republic over coming years. He accused incumbent insurers of operating in a market that is "not natural" because of the concentration of operators.
"It's an area we would actively examine," he said, declining to specify whether the bank would be more interested in the general market or life assurance.
He said it would be particularly natural for the bank to look at insurance because of the strength of its parent, HBOS, in the area.
BOSI is in the process of investing €160 million in entering the retail banking market and has opened seven new branches since the start of this year. It bought 54 ESB retail outlets in 2005 and is targeting a total of 46 new outlets.
"We are meaningfully exceeding expectations at this stage," said Mr Duffy.
Sterling profits before last year's investment rose by 20 per cent to £116 million, but this growth was reduced to 16 per cent when the results were translated into euro. In euro terms, this meant profits rose from €144 million to €167 million over the year.
When last year's retail investment was factored into the numbers, profits were up by 7 per cent in sterling terms.
The performance was driven by lending, with the bank's mortgage book expanding by 50 per cent to almost €4 billion and its business loan book growing from €10 billion to €13.6 billion. Both growth rates were ahead of the market.
"Credit conditions right across the market are very benign," said Harry Slowey, executive director of the bank.
The bank's loan pipeline stood at €3.4 billion as the year turned, having amounted to slightly more than €2 billion a year earlier.
In mortgages, BOSI estimates that it is currently taking 6 per cent of the market for new business.
On the other side of the business, deposits grew by 13 per cent to €6.4 billion, with the funds principally held by business customers.
BOSI is seeking to raise its savings presence in the consumer market by offering a 3.75 per cent interest rate, subject to a number of conditions.
"The year ahead looks very promising, with customer reaction to our retail proposition very positive," said Mr Duffy, adding that the bank would be spending "real money" on the offering in 2006.
He also signalled "excellent prospects" for business banking, despite acknowledging a decline in margins because of increased competition.
Margins across the bank fell from 2.01 per cent to 1.77 per cent, with BOSI, in common with other banks, expecting downward pressure to remain in place.
