National Irish Bank is continuing to struggle, with profits down 35 per cent from £20 million (€25.4 million) to £13 million (€16.5 million) in the nine months to the end of June. Higher provisions for bad debts at its Irish banking operations, combined with a decline in interest earned on savings and loans during the nine months have again depressed profits at the bank.

NIB, which is part of National Australia Bank, is still the subject of an ongoing investigations into the marketing of unauthorised offshore insurance products and interest loading on customer accounts at certain branches which have been damaging to its business.

NIB chief operations officer, Mr Owen Vanzuyden, said these investigations are moving into their final phase.

The bank is in discussions with the Revenue Commissioners on its DIRT liabilities on bogus non-resident accounts following the findings of the Dail Public Accounts Committee inquiry. NIB has made a £1.7 million provision for its liabilities.

Mr Vanzuyden said the bank believes it is "adequately covered" with regard to DIRT.

Some 232 of the 429 NIB customers who invested in the offshore scheme have already paid a total of €12.5 million in a settlement with the Revenue.

In the three months between March and June 2000 the bank has reported pre-tax profits of £4 million compared to £6 million in the same period last year. The third quarter out-turn follows a poor performance in the previous six months.

Intense competition hit the bank's net interest income - the differential between the amount of money it makes on loans net of that paid out in interest on deposits - fell 2.3 per cent in the nine months to the end of June from £44 million to £43 million. While income earned from other banking activities was also weaker at £17 million compared with £18 million in 1999, a drop of 6 per cent.

Operating expenses at the bank were higher during the period rising 2.3 per cent from £43 million to £44 million. But the biggest impact on its financial performance is the sharp increase in the amount of money the bank has provided for bad debts.

In June 1999 the bank recovered debts of £1 million, but this year it has made a £3 million provision for potential bad debts. NIB attributes the increase in provisions to a change in the way these provisions are now accounted for across the NAB group.

Lending at NIB increased during the nine months, rising by 14 per cent to £1.5 billion. Its mortgage business rose by 11 per cent to £517 million. Bank deposits also expanded, but at a much slower rate rising to £1.3 billion, up 5.4 per cent.

Commenting on the figures yesterday, Mr Vanzuyden said the decline in profits was not as substantial as the headline figures suggest because of an adjustment to its accounts earlier in the financial year.

He was upbeat about the bank's prospects in the Irish market and said there were encouraging signs which suggest the bank is increasingly becoming more broadly focused.

By year end he expected NIB to post a 20 per cent increase in lending. "We are getting our share of the market again and are continuing to grow."