ULSTER BANK increased its operating profit by 22 per cent to €750 million in 2007 as loans rose by 24 per cent to €64.1 billion and deposits increased by 20 per cent to €29.7 billion.
Total income earned at the bank and its subsidiary, First Active, rose 15 per cent to €1.7 billion during the year. Business loans increased by 27 per cent to €33.8 billion and mortgages by 22 per cent to €24.9 billion. The bank's total assets rose by 23 per cent to €74.6 billion.
Chief executive Cormac McCarthy said the bank would continue to increase its profits but not at the same rate as before. "Growth will be strong but I don't think it will be as strong. The mortgage market has contracted and the economy is slowing a little bit more but there is still opportunity out there."
He said a decrease of 15-20 per cent in the mortgage market was "not that phenomenal", bringing it back to 2005 levels. He agreed with the consensus that the number of new houses would fall from about 78,000 in 2007 to 45,000 this year, but he said the housebuilding sector could cope.
"We would not be a speculative lender. The interesting thing about the housebuilding market is its ability to contract supply. It is good that we have a housebuilding sector that can flex itself."
Mr McCarthy said the mortgage market fell by 15 per cent in 2007 and would drop a further 15- 20 per cent this year, although he expects activity to pick up later this year. Property prices declined by 7-10 per cent in 2007 and would fall a further 5 per cent this year, he said.
"There is some anecdotal evidence of first-time buyers coming back into the market as builders cut prices. The medium-term outlook for the economy is good and that will support demand."
He said there were buyers still out there. "There are more people sitting on their hands waiting for prices to contract."
Mr McCarthy said he expected the European Central Bank (ECB) to hold rates steady through 2008. "It would not surprise me if the ECB does not change rates. All the signals are that inflation is the watchword this year and I think they will stick to their guns."
Ulster Bank said its customer numbers had increased to 1.8 million as it attracted 100,000 new current account customers, helped by its offer to pay switchers €150. The bank started offering new customers €2,000 earlier this month to move their current account and mortgage.
"We are very pleased with the reaction to our campaigns. It is a long game but we are making progress," said Mr McCarthy.
He declined to say how much of the loan book was exposed to the slowing housebuilding sector. The bank's bad debts totalled 0.15- 0.2 per cent of loans in 2007, the same level as a year earlier. He didn't expect the figure to rise.
"We are a prudent lender and we have the value of being part of the Royal Bank of Scotland book. I have no reason that it will be any different. There is nothing in the market that would be of concern. The Irish balance sheet is good."
He said higher funding costs in the banking sector had been passed on to customers and the cost of credit would "not go back to where it was", but he said as long as the economy kept performing strongly this "should not be a major cause of concern".
The bank opened 10 branches in 2007, increasing its presence in Munster in particular. Mr McCarthy said the bank had 282 branches and 56 business offices North and south, and would open at least 10 more this year.
Ulster Bank's parent company, Royal Bank of Scotland, reported a 9 per cent increase in operating profit to £10.3 billion sterling (€13.4 billion). Shares in the UK's second largest bank closed down 2 per cent at 402p.
