Strong growth in loans and advances led to a 10.5 per cent increase in pre-tax profits to £22.1 million at TSB Bank for the year ended October 31st, 1997.

Buoyed by the strong economy, loans and advances grew by 17.4 per cent to £918 million, while deposits also rose to £1,378 million, an 8.5 per cent increase on the previous year.

"We saw good growth right across the business. It was the second best year ever for advances and resources growth," said chief executive, Mr Harry Lorton.

TSB said it now occupied third position in the retail personal banking sector, behind AIB and Bank of Ireland and ahead of Ulster Bank.

It has been running down the funds deposited with the National Treasury Management Agency (NTMA) over the last five years and switching these to customer lending.

At end-October 1997, funds deposited with the Minister for Finance amounted to £22.3 million, down from £142.2 million at the end of the 1996 financial year and the bank's deposits with the Minister for Finance expired completely in January.

TSB said switching of funds from the NTMA to customer lending had helped it generate the growth that has taken it from the fifth to the third spot in the personal retail banking market in five years.

The bank's surplus after a taxation charge of £8.9 million rose 4 per cent to £13.3 million. It paid corporation tax at the full rate for the full year for the first time, having gradually been eased into the tax net since 1993.

Total income at the bank increased by 10 per cent to £79.5 million, comprising a 9.2 per cent rise in net interest income to £61.8 million and a 13.2 per cent increase in other income, which includes fees and commissions, to £17.7 million.

TSB said non-interest income mainly from fees and commissions was becoming increasingly important to it and had risen by a cumulative 107 per cent since 1992.

The net interest margin, which represents the profits on lending less the cost of funds, was marginally higher at 4.34 per cent, against 4.30 per cent in 1996.

TSB's bad debts provision slipped by £15,000 or 0.6 per cent to £2.7 million, representing 0.31 per cent of average loans but costs rose by more than 10 per cent to £54.7 million, partly reflecting the costs associated with the bank's investment programme. Its cost-to-income ratio rose marginally to 68.8 per cent from 68.6 per cent a year earlier.

The bank says it is spending £8 million over two-three years on increasing and expanding its services. It opened three new branches last year in Blackrock, Co Dublin; in Letterkenny and in Newbridge, bringing the number of outlets in its network to 80. It plans to launch a 24-hour telephone banking operation before the summer involving an upfront cost of £2£3 million. It has also put in place ATM reciprocity with the main Irish banks and a number of off-site ATMs were added to its network so customers can now access their accounts through more than 1,100 ATMs.

TSB also increased its investment in technology. It is actively planning for the changeover to the euro which it estimates will cost £3 million and for the year 2000.