First Active has reported a strong half-year performance with pre-tax profits up 12 per cent to €33.9 million largely on the back of robust mortgage lending.

First Active chief executive Mr Cormac McCarthy said yesterday the bank had achieved growth across its savings and lending activities and had a strong pipeline of new business going into the second half of the year.

"We are very encouraged by the pipeline of new business and will be investing in new information technology systems to continue to support our growth."

The results were slightly ahead of analysts' forecasts and were well received in the market although the shares were weaker having performed well in recent weeks. Yesterday First Active shares traded lower to €4.55, down nine cents.

Shareholders, who recently received a payment arising out of the redistribution of surplus capital by the bank, will be paid an interim dividend of six cents per share, and an increase of 14 per cent on the same period last year. Earnings per share increased by 7 per cent to 19.5 cent.

The former building society generated total income of €74.7 million, up 9 per cent on the first half of last year.

The former building society - it will lose its legislative protection against a takeover in September - would not comment on whether it had had approaches from other financial institutions. "That is for others to speculate on. We are running this company for shareholders. The business is competing very well and is prospering as an independent company," Mr McCarthy said.

Some €29.5 million of profits were earned in the Republic with a further €4.4 million generated in the UK. Total income increased by 9 per cent to €74.7 million.

Total lending during the period increased by 6 per cent to €7.6 billion.

Residential mortgage lending rose by 7 per cent to €5.9 billion and represents 78 per cent of its total loan book. Lending for commercial property rose by 13 per cent to €1.2 billion.

Mr McCarthy said that despite Central Bank concerns about the rate of growth in mortgage lending it was not seeing any stress from customers in terms of meeting repayments.

"We have not stretched our mortgage lending criteria. Interest rates are low and with healthy demand we are not particularly concerned about the quality of our loanbook," he said.

Its provisions for bad debts were also higher at €2.9 million, compared with €2.7 million at the end of the half year in 2002.

In April the bank appointed a receiver to two construction firms in Galway to which it had lent €28 million. Mr McCarthy said its actions to recover monies owed were working well.

Most money owed by these firms accounts for the sharp rise in non-performing loans reported by the bank which rose from €51.8 million to €78.1 million.

The total amount charged to its accounts in the form of bad debts is only slightly higher at €2.9 million compared with €2.7 million in the same period last year suggesting it hopes for a substantial recovery.

This week the Galway City Tribune reported that receiver Mr Ray Jackson had secured a deal to sell the Baily Point complex in Salthill which was to be developed for €40 million.

The two firms were owned by Galway businessman Mr Brian Cunningham.