Irish Life says operating profit to fall

Irish Life & Permanent, Ireland's biggest mortgage lender, said today its full-year operating profit will fall by a “mid to high single digit per cent,” as demand for new loans eases and the credit crunch raises borrowing costs.

"Loan book growth will be slightly ahead of target at the half year as the committed funding of pipeline applications is completed but will moderate in the second half of the year," the bank said in a statement.

"Other areas of lending, such as residential investment property, are being curtailed."

IL&P said while sales of pension and protection products were slightly ahead of 2007 levels, bond sales have fallen sharply, reflecting weak general market conditions.

The bank said life sales were forecast to fall by "mid teens percent" in the first half of 2008, compared with the same period last year. The bank noted that 70 per cent of SSIA accounts matured during the first half of 2007.

This should see pretax operating profit for the life sector of the business for 2008 fall by a "a low single digit per cent".

The bank said it was curtailing loans for investment in residential property and that the overall balance sheet growth for the year was expected to be "low single digit per cent".

IL&P added that it expects to add 50,000 current account customers this year.

The bank also said it was making good progress in refinancing around €3 billion of debt maturing the third quarter and said it hopes to have a substantial proportion of funding complete by the end of June.

At the end of the first half of the year the bank reported strong capital ratios with an expected capital ratio of 9.9 per cent (tier 1) for the bank.

It said capital requirements in 2008 will be lower than other years and can be met by internal resources. Irish Life & Permanent shares moved ahead over 30 cents on the publication of the statement to reach 12.31pm at €8.715. Irish Life shares have fallen from over €20 in the last 12 months.