GOOD growth across all its businesses elevated profits at Ulster Bank by 17 per cent to a record £120.1 million sterling for 1995.

Investment banking and capital markets put in improved profit performances and there were also strong advances in mortgage, lending and leasing. But income growth from higher lending was constrained by tightening margins in competitive markets.

Ulster's operations in the Republic generated profits of £71 million, or 59.1 per cent of the 1995 result, with the balance coming from its operations in Northern Ireland.

The contribution from operations in the Republic increased by 14 per cent, but it was a marginally lower proportion of the bank's overall profits, reflecting stronger growth in Northern Ireland. Pre tax profits in Northern Ireland rose by 21 per cent to £49 million.

Group pre tax profits were boosted by a 21 per cent increase in lending (up IS per cent in Northern Ireland and 26 per cent in the Republic), a 20 per cent rise in customer deposits and a fall of £3 million to £5 million in the bank's bad debt provision.

Mortgage lending increased by 16 per cent in Northern Ireland and by 20 per cent in the Republic, while asset finance through the Lombard and Ulster subsidiary accounted for 13 per cent of the 1995 profits.

Ulster is getting about 15 per cent of all new mortgage lending by banks (excluding Irish Permanent), its chief executive, Mr Ronnie Kells, claimed. Ulster had a mortgage book in the Republic of £270 million at the end of 1995, he said.

Reflecting continuing pressure on lending margins in very competitive markets Ulster's net interest income only rose by 13 per cent to £24.1 million despite the 21 per cent growth in its loan book. Ulster declined to disclose its lending margins "for competitive reasons". But Mr Kells said the net interest margin was just marginally down at 3.3 per cent.

A breakdown of profits between retail and market operations indicates that NCB stockbrokers made a good contribution. Retail profits increased by 8 per cent to £69 million, while profits at Ulster Bank Markets increase by 34 per cent to £51 million.

By year end the Republic accounted for £2 billion of Ulster's £3.8 billion loan book with loans of £1.8 billion in Northern Ireland.

As well as providing a quality service for customers, a good working environment and fair rewards for staff and a competitive return for shareholders banks, "must help fuel the engine, of economic growth on which their own growth depends", according to the chairman, Sir George Quigley.

Ulster, and its parent National Westminister Bank, is committed to investing in the growth and development of its Irish operations, he said. Ulster's interest in TSB Bank "remains undiminished", he said. But "we are not holding our breath" for a Government decision, he said, adding that Ulster will continue to expand its branch network.

Ulster has 107 branches in the Republic and a new branch will be opened in Gorey next week. Reflecting its development stage the bank's costs rose by 18 per cent to £192 million, increasing its cost income ratio to 60.5 per cent. The increase included the costs of integrating NCB and a voluntary severance package.

Costs were 8 per cent higher when these factors are excluded. Some 100 staff were added last year, bringing employment to 4,274 people 2,200 in the Republic.

At year end Ulster has a 9.49 per cent Tier one capital ratio. The bank recorded a return on average assets of 1.26 per cent.

On interest rates, Ulster said that a stable background will be required before rates can be reduced. But the overall trend appears to be downwards, Mr Kells said.