Equity Bank, the Dublin-based subsidiary of Bank of Scotland, has announced a 47 per cent increase in pre-tax profits to £6.1 million (€7.75 million) for the year to the end of February 1999.

The bank has said it is determined to continue to grow, both organically and through acquisition. Chief executive Mr Mark Duffy said it was currently looking at two acquisition prospects and was at an advanced stage with regard to one. He declined to comment on which companies it was looking at. Mr Duffy said Equity had a budget of up to £250 million to spend on acquisitions in the Irish market but was interested only in buying companies that fitted with its existing focus on the corporate and consumer markets.

There has been speculation in banking circles that Equity might be interested in buying ICC Bank or Gandon, both of which are on the market. However, industry sources believe much of ICC's business would not fit with Equity, which might be reluctant to pay top dollar for a business parts of which would later have to be sold. Gandon, however, might be of more interest to the bank.

Meanwhile, Equity said last year had been a very good one for the bank. Lending increased to more than £385 million, while deposits rose by 33 per cent to £406 million. The bank's total assets rose by 47 per cent to £699 million and Mr Duffy said he expected this to top £1 billion by the end of 1999.

The bank also said it managed to stabilise margins at 2.46 per cent, helped by the consumer side of the business, while its cost/income ratio fell to 48.6 per cent.

It plans to move the consumer part of its business, which accounts for around 30 per cent of the total, to new premises in the greater Dublin area while the corporate division will continue to be run from its St Stephen's Green offices.

Although the bank has no interest in developing a branch network in the Republic, it believes it needs a greater physical presence outside the capital. It has a new office in Galway where it expects to employ up to 10 people and also intends to open in the southern part of the State, although it has not yet decided on an exact location. Its Belfast business is performing well and is now the fifth-largest player in the North. The bank has also opened offices in Manchester and London to service Irish clients doing business in Britain and the large ethnic Irish population living there.

"We see big potential in the UK. It's early days yet but we have got off to a very promising start," Mr Duffy said. The operations in Northern Ireland and Britain helped diversify the bank's business so that it was not entirely dependent on one geographic area, he said.

Equity also sees the provision of mezzanine finance for management buyouts, an area in which its parent has expertise, as a growing part of its business.

It worked closely with Bank of Scotland in a recent deal for Campbell Bewleys.