STRONG growth in new mortgage business in the first six months of 1996 has helped to push profits at Irish Permanent up 16.8 per cent to £23.3 million.

Announcing better-than-expected half-year results for the group yesterday, chief executive, Mr Roy Douglas, said it would be interested in buying TSB Bank if the Government put it on the market.

He said Irish Permanent would take a "very hard" look at the TSB's books at that stage, with a view to bidding for the bank. It had made its intentions known to the Minister for Finance.

The group would also continue to look at other possible acquisitions, particularly in the Irish market.

On the back of the good half-year performance, its 137,000 shareholders - most of whom received shares when the company converted from a building society in 1994 - will be paid an interim dividend of 4p per share. The shares continued to trade at 402p in Dublin yesterday.

Against intense competition in the mortgage market and increased pressure on profit margins in its lending business, Mr Douglas said the half-year figures showed a satisfactory" performance for the group.

Mortgage lending business was particularly strong this year, advancing £246 million in new home loans in the six months to the end of June, compared with £168 million over the same period last year.

Irish Permanent is the biggest provider of home loans in the Republic and is estimated to retain around 20 per cent of the mortgage market.

Demand for non-residential loans was also good over the period, with £64 million advanced in commercial and personal loans compared with £38.1 million in the same period in 1995.

But the savings market continued to be difficult, with customer deposits up by £75 million at the half-year stage.

Despite fierce competition in the mortgage and savings market, net interest income - the profits on lending, less the cost of funds - rose by 9.2 per cent from £44.5 million to £48.5 million, mainly due to strong growth in lending volumes across the group.

Outside of its core lending and deposits business, the group also benefitted from a good contribution from its subsidiary companies, which together added 15.2 per cent of the group's total income over the six months.

Irish Permanent's life assurance company, Irish Progressive, added embedded value profits of £5.1 million against £4.5 million in the previous half-year. This figure includes £430 million in life assurance assets attributable to Irish Progressive policyholders.

Pre-tax profits at the group's motor finance arm, Irish Permanent Finance, were also running ahead of last year, up from £0.8 million to £1.1 million in 1996.

New lending at that company rose 68 per cent since the beginning of 1996, the group said, estimating that it had captured about 15 per cent of the car finance market.

Irish Permanent's Isle of Man-based deposit taking company contributed £0.3 million to group pre-tax profits. While its private bank, Guinness & Mahon, returned a profit of £0.4 million for the group.

Administrative expenses rose from £27.1 million to £28.7 million, with most of the increase due to the extra cost to the Irish Permanent of arranging mortgages.