STRONG performances across all areas of its business pushed Ulster Bank Group's pre tax profit up by 16 per cent, from £57 million sterling to £66 million, in the first half of 1996.
Further growth is expected in the second six months, though this could be upset if the fall out from the BSE scare develops, said group chief executive, Mr Ronnie Kells. However, "as things stand, we expect a satisfactory second half".
Ulster Bank expects Ireland to join the EMU but Britain to stay out. He said this would lead to some hiccups in interest rates and exchange rates. But over the longer term, both rates would be less volatile.
The latest results were helped by the buoyancy in the economies of Northern Ireland and the Republic.
"Continuing low interest rates dynamism in the business sector and overall economic growth are clearly the factors which are driving the bank's increasing levels of business," Mr Kells said.
Around two thirds of profits come from the operations in the Republic which experienced a faster rate of growth. This was attributed both to the higher level of economic buoyancy in the Republic and the expansion of the core businesses here. He instanced the growth of stockbrokers, NCB, and Lombard & Ulster.
Mr Kells said the bank had not experienced any adverse affects from the changed political climate in Northern Ireland. Leasing and retail banking have been very good" and no area was sluggish. But major damage had been done to the potential for business and tourism had already been affected.
Ulster Bank achieved a 12 per cent growth in income from £153 million in the first half of 1995 to £171 million in the first half of 1996, mainly through lending and treasury income. The retail branch business also produced "a satisfactory result despite strong pressure on margins".
A breakdown of income shows a rise in net interest income from £100 million to £111 million (this is down on the £112 million generated in the second half of 1996, reflecting intense competition), an increase in fees and commissions from £31 million to £35 million, and a rise in dealing profits from £21 million to £23 million.
The net interest margin amounted to 3.3 per cent in 1995. The bank has not disclosed the net interest margin for the first half, but considering the high level of competition, this is likely to have fallen.
Lending increased by £237 million, representing a 6 per cent increase. Bad debt provisions are just marginally up at £6 million. Profits from Ulster Bank Markets - the corporate banking, treasury, investment management and stockbroking division - increased by 17 per cent.
The cost income ratio improved from 59.5 per cent to 57.9 per cent. However, staff costs rose by 11 per cent from £55 million to £61 million. This increase is attributed to pay awards and a voluntary severance programme.
The underlying increase was 7.5 per cent, said Mr Kells.
The bank is still talking to the unions about a new grading system for employees. Under the bank's proposals, pay would be based on the types of jobs performed, rather than length of service.
