First Active has delivered a stronger-than-expected performance for 2002, reporting a 26 per cent rise in pre-tax profits to €66.1 million after exceptional gains. It has also announced plans to distribute €160 million in surplus capital to its shareholders in June.

The former building society has reported continuing strong demand for its mortgage and savings products and further progress in reducing its cost base during last year.

Announcing the figures yesterday, First Active chief executive, Mr Cormac McCarthy, said it intends to do more of the same in 2003.

"We will continue to focus on Ireland and on the mortgage and savings market and make no apologies for doing that," he said yesterday.

The bank's headline profit figures were swelled by the proceeds of the sale of its stake in the British mortgage and financial services provider, Brittanic Money which resulted in an exceptional gain of €40.7 million. Some of this money will be part of the €160 million it proposes to return to First Active shareholders.

With the Brittanic sale proceeds the bank's increase in pre-tax profits rises to 96 per cent at €106.8 million.

First Active shares moved ahead in Dublin following the results.

By close of business, the shares had gained 25 cents to end at €5.70.

Shareholders will receive a 14 per cent increase in their dividends to 15.5 cents per share on the back of the bank's full-year outturn. The bank, which has been completely restructured over the past three years, has reported strong growth in new business coming through its 50 branches and has managed to maintain its margin on its mortgage and savings activity.

First Active achieved a 14 per cent increase in total income to €141.7 million with good growth in fees and other revenues earned from cross selling products such as insurance with its core lending and savings deals.

It managed to hold the increase in costs to below the rate of inflation and in 2002 its key cost to income ratio reduced from 58.7 per cent to 54.3 per cent, one of the lowest among Irish financial institutions.

New residential lending increased by 14 per cent to €1.4 billion. Lending to the commercial sector rose by 21 per cent to €388 million.

The bank has said the quality of its loan book remains very high and its provisions for bad and non-performing loans remain relatively small.

First Active had flagged the possible redistribution of some of its surplus capital to shareholders last year to bring it in line with what it considers to be appropriate to support its underlying business.

The payment of €160 million will reduce the bank's capital ratios which may result in some downgrading of its credit rating by some of the agencies.

Fitch yesterday reduced its ratings although Moodys has told the bank its ratings will not be affected.