ACCBank is exiting on a high note. The State-owned institution, to be merged with TSB and floated on the stock market next year, has reported a 31 per cent rise in pre-tax profits to £20.5 million (€26.3 million) in 1998, its last full year to produce results as ACCBank.
Mr John McCloskey, chief executive, said business continued to strengthen this year and predicted ACCBank would be in a strong financial position when the merger was completed.
"It is not unreasonable to assume the remainder of 1999 will be good," he said yesterday.
ACCBank staff, who had refused to co-operate with the merger, ended their dispute last week after accepting a package which guaranteed no compulsory redundancies and severance terms providing up to eight weeks' salary for anyone made redundant. But TSB staff have now challenged that agreement's validity and fear they may bear the brunt of any job losses. Mr McCloskey was confident that current difficulties could be resolved relatively quickly and would not derail the flotation plans.
A merged ACCBank and TSB is due to list on the stock market in May 2000. In line with growth in the banking sector last year, ACCBank has reported buoyant lending across its mortgage and business customer base and good profits from its treasury operations. But it also had to endure tighter margins.
After tax, profits rose by 33 per cent from £11.8 million in 1997 to £15.7 million. Net interest income - the difference between interest received on its loans less interest paid out on deposits - increased from £140 million to £158 million, mainly due to continuing demand for mortgage finance.
Total loans to customers rose to £1.6 billion compared with £1.3 billion in the previous year. Customer deposits also increased, expanding from £1.1 billion to £1.2 billion.
The fall in interest rates affected ACCBank's net interest margins, which were down by close to 0.11 of one percentage point to 2.65 per cent.
Mr McCloskey believes margins will decline by a similar amount in 1999 as the latest drop in interest rates takes effect.
The bank also earned fees and commissions of £7 million and realised dealing profits of £1.6 million, up from £727,000 in the previous 12 months.
In total, its operating income increased from £54 million to £62 million in 1998.
Against this, administrative expenses rose sharply from £33.9 million to £37 million. Staff costs rose by £2 million to £16 million, with general administration expenses up from £14.9 million to £15.5 million. Its cost-to-income ratio improved, falling from 68 per cent to 66 per cent, but still remains very high by industry standards.
The bank's provisions for bad debts charged to the profit and loss account fell from £1.4 million to £872,000. During the year, it wrote off debts of £4.1 million, down from £4.2 million in 1997, and recovered £1.1 million in debts previously written off.
