Buoyant mortgage lending drove profits up by 9 per cent to €53.8 million at the EBS Building Society last year.

The mutual society posted a 27 per cent increase in its homeloan business for 2005, with advances climbing to €3.4 billion by year-end. Overall, new lending at EBS increased by 22 per cent to €3.8 billion.

Like-for-like profits, which strip out exceptionals, were ahead by 20 per cent year on year.

EBS chief executive, Ted McGovern, welcomed the performance but said the society's franchise was "capable of being stretched a lot more".

He outlined plans for new tied relationships with Irish Life and Allianz in life and general assurance respectively, and said EBS was also looking at getting into the "sub-prime" mortgage market with a partner. This market caters for people who have poor credit histories and have difficulty accessing conventional credit.

Mr McGovern also looked ahead to forthcoming building societies legislation, which he said should give EBS more "clarity" for its future development. He said EBS would remain committed to its mutual status and had "no near-term plans" to link with other organisations at a profound level. "We believe the mutual model is a very sustainable one," he said yesterday.

In 2004, EBS almost concluded a merger with Dutch bank, Rabobank, but talks ended without agreement.

EBS claims to have returned €22.5 million to its members last year through a "mutuality dividend", an amalgam of pricing and other benefits. This was 10 per cent more than in 2004, and was partially reflected in a decline in EBS's net interest margin from 0.96 per cent to 0.8 per cent.

Mr McGovern said the society aimed to increase member value by 15 per cent in 2006. EBS recorded a 20 per cent increase in customer funds last year, with the jump to €8.8 billion reflecting in part a strong performance in corporate accounts.

EBS also has about 69,000 Special Savings Incentive Account (SSIA) customers, with the bulk of these accounts to mature next year. Over coming weeks, the society will launch a flexible new savings product tailored to mop up this post-SSIA business.

Mr McGovern flagged a "very good start" to 2006, with first-quarter advances and pipeline loans up 40 per cent on the same months of 2005. The jump is, however, flattered by a weak comparison, and EBS expects the market as a whole to grow on average by 8 per cent this year. Within this, refinancing and switching is forecast to expand by 15 per cent.

"It seems to keep going and the fundamentals get stronger and stronger," said Mr McGovern of the housing market.

EBS started to offer its mortgages through brokers last July and expects about 15 per cent of new homeloan business to come through this channel in 2006.

The society sold about 12 per cent of new mortgages in the Republic last year, about the same level as in 2004. "We'd be very confident that we've got the ship headed in a good direction," Mr McGovern said.