A hefty legal bill and DIRT arrears on special savings accounts have eaten into profits at National Irish Bank (NIB) this year but it insists the negative publicity it has attracted has not damaged its core business.

NIB has reported a 36 per cent rise in pre-tax profits to £18.7 million (€23.7 million) from £13.7 million (€17.4 million).

While NIB chief executive Mr Don Price described the full-year performance as "satisfactory", the bank's profits were significantly depressed by the costs incurred in the ongoing High Court inspector's investigation into the marketing of unauthorised offshore insurance products by the bank.

NIB has set aside £3.7 million to meet the legal costs of the investigation in addition to the £1 million provision made in the 1998 accounts. The investigation is expected to continue into the middle of 2000 and the bank is hoping these provisions will be sufficient to meet its eventual legal bill.

The Australian-owned bank has also made a provision of £750,000 to settle any DIRT arrears owed to the Revenue on some of the bank's special savings accounts. The arrears relate to the six-year period since 1993 when these accounts were introduced by the then government.

A further £1.3 million provision has been made to cover the cost of an ongoing restructuring programme at the bank. Mr Price said that, despite the ongoing investigation and recent revelations that it wrote off a £250,000 debt for the Sligo/Leitrim Fianna Fail TD, Mr John Ellis, its customer base was holding steady. "Over the past couple of years, the number of customers we have hasn't moved out of a range of plus or minus 1 per cent. The biggest impact is that we haven't been able to add to that customer base," he explained.

Mr Price stressed the bank was now focused on rebuilding the National Irish Bank franchise, and that its parent, National Australia Bank (NAB), remained firmly committed to its operations in the Republic.

"The group has been frustrated by its failure to make acquisitions here, which has left it without the scale it needs in the Republic, but NAB is here for the long haul."

Mr Price refused to comment on whether NAB would be among the bidders for Ulster Bank next week. The acquisition of Ulster Bank would give NIB a significant presence in the Republic.

In the 12 months to the end of September, NIB reported growth in income earned on its core lending and savings products business to £58.6 million from £53.9 million in 1998. Its other income, which is mainly generated through fees and commissions on other products, was lower - falling from £23.5 million to £21.6 million this year.

The bank has also made an exceptional provision for bad debts of £4.9 million. Mr Price explained this was a once-off provision which reflected a new provisioning policy within the NAB group and incorporated adjustments related to loans advanced over the past 10 years.