GOOD lending growth helped to boost pre tax profits at National Irish to £10.98 million for the six months to the end of March.

The 2.4 per cent rise in profits for the latest period was depressed by a bad debt charge of £169,000 compared with a write back to profits of £704,000 for the corresponding previous period. Underlying profits before bad debts increased by 11.3 per cent to £11.2 million.

In a favourable economic environment, non performing loans have fallen to 1.22 per cent of total lending compared with 2.5 per cent at the end of March 1995, but executive director Mr Barry Seymour said bad debt charges at NIB and other banks must now be at or close to "the bottom of its cycle".

He expressed some concern about increases in house prices and at the possible impact of the BSE crises on the farming sector.

"We have a fragmented book with no one big exposure in the agriculture sector. But we are watching the situation and, if it is still as uncertain at the end of September, we may have to put a provision against it," he said.

Lending to customers rose by 10.7 per cent in the six month period to bring the loan book to £825 million. Business lending rose by 11 per cent, reflecting the development of a specialist business banking division and the launch of new products for small and medium sized business borrowers. Mortgage lending rose by 14 per cent but there was some slippage in personal lending.

Customer deposits at £924 million were 8.2 per cent ahead of March 1995 levels but £11 million down on the level at the end of September 1995. NIB lost some fixed rate deposits when it moved ahead of the market to cut interest rates in February, said Mr Seymour.

Better balance sheet management led to a small increase in the bank's net interest margin to 4 per cent for the period, he said.

Net interest income rose by 8 per cent to £23 million while income from fees and commissions were 13.3 per cent higher at £8.4 million. Costs rose by 8.4 per cent to £20.2 million. After a lower tax charge - down to 35.5 per cent from 41 per cent - profits after tax rose by 12 per cent to £7.09 million.

With a 4.5 per cent rise in total assets to £1.16 billion return on average assets rose to 1.23 percent from 1.13 per cent This year, NIB is expected to pay a dividend to its parent, National Australia Bank, for the first time.

NAB, which yesterday reported a 6.2 per cent rise in group operating profits for the half year to Aus$ 995 million, is still for the Government to future of the TSB Bank, made a bid for the bank two ago.

"We would love to get bank. But we are moving while the decision is pending, are submitting strategic plans to NAB and our parent will allow us to make substantial investment to achieve growth," Mr Seymour said. Plans included an expansion in distribution outlets, including kiosk banks, and an extension of ATMs and telephonic and electronic banking devices, he said.

Reducing its current cost/income ratio of 64 per cent would be difficult because of the small scale of the bank, he admitted.

Mr Seymour rejected any suggestion that NIB would be unable to offer customers the full range of electronic services because of its small scale. "Remember we are part of a large, very advanced group," he said.